The House of Lords Communications and Digital Committee has started an inquiry about AI and creative tech. It says that the UK has a vibrant startup scene with a strong reputation for innovation. However, major challenges continue to hinder startups from developing into the stable, scaleup businesses the UK needs to secure long-term prosperity.
The reward for improving the UK’s scaleup potential is high. According to the Committee, scaleups have a disproportionately large economic impact – they create highly skilled jobs, drive productivity and boost UK competitiveness. In 2023, scale-ups represented just 1% of UK small and medium-sized enterprises, but accounted for 22% of turnover, valued at £497 billion.
The consequences of failing to capitalise on these opportunities are also considerable. International competition is growing. Business strategies focusing on foreign buyouts or overseas scaling remain a feature, rather than a bug, of the UK’s ecosystem. Without concerted action, the UK risks losing its competitive edge in strategic economic sectors.
Several initiatives have sought to boost the UK’s scaleup potential in recent years. However, there are many barriers to progress, including funding, skills, data, networks, risk appetite and investment culture. These hold UK innovators back from fulfilling their potential, and from benefiting the UK’s economy and society.
The inquiry focuses on two high-potential areas where the UK has existing advantages: technology in the creative industries, and more widely, AI. These are key sectors where the potential of scaleup firms is greatest, and growth is most achievable. Businesses in these areas also face a range of challenges that need to be addressed.
The Committee is seeking to understand the specific barriers to SMEs scaling in AI and creative technology, and to propose changes to the UK government and industry practices that can be delivered over the next five years. This will include evaluating the adequacy of existing schemes to support scaling; assessing the new government’s plans; and learning lessons from past successes and failures. It is asking:
1. What is the economic potential for improving the UK’s scale-up landscape, and what are the consequences of failing to capitalise on this?
2. What specific barriers do SMEs face when seeking to scale in AI, and in creative technology?
a. To what extent are these challenges unique to their respective sectors?
b. What role does access to finance play?
3. How effectively are existing organisations, catalyst programmes, industry schemes and other government initiatives addressing these issues?
a. What outcomes are being achieved?
b. Are any changes necessary, and how would they work in practice?
4. What further measures (financial and non-financial) are needed to address barriers to scale in AI, and creative technology?
5. What role do academic institutions play here, and what can be done to boost commercial links with AI and creative technology?
6. What can the UK learn from overseas?
The Committee invites written contributions by 16 October 2024.
