Silicon Valley was not built in a day. Nor was London’s tech scene. And while a single government is not solely responsible for its growth, it can certainly benefit or hinder it.
The tech world moves slower than it is portrayed. Venture capitalists (VCs) often tell their investors (LPs) that the returns take between five and seven years. In private, they all know it’s closer to 15. But the best VCs and LPs (and governments) invest for the long term and reap huge rewards in doing so.
The last time the U.K. had a Labour government was in 2010. No one had heard of Airbnb or Uber. SaaS was booming, and the term “deeptech” was virtually unheard of.
Over the past decade or so, the tech world started to realize that durable step changes in growth and positive impact cannot come from software development alone. Large technological breakthroughs in the underlying engineering are what power not only huge value creation but also long-term societal benefits.
For example, the boom of SaaS companies was powered by the underlying growth in computational capacity, sustained amongst others by semiconductor development and the advent of scaled-out cloud computing. Twenty to 30 years ago, U.K. semiconductors leader Arm and others were innovative, small, venture- and government-backed teams, led by ambitious and visionary founders.
There are early-stage technologies today that will have the same level of impact. Taking the evolution of computing as a case study, to understand what that looks like in 20 years, we need to turn to the next frontier in computation: quantum computing.
Quantum computing is a complete departure from how we have done computation up until now. The development of current computing has given us the ability to create “digital twins” of the macroscopic world—from financial services to aviation. Quantum computing will allow us to create digital twins of the world at a very small scale—and one day be able to design and predict how atoms come together to form everything around us.
Not only is quantum computing estimated to produce an additional £1.3 trillion in global GDP—via areas such as automotive, chemicals, financial services, and life sciences—but it will also be one of our best and most important tools to combat some of the world’s biggest challenges such as the climate and energy crisis.
The U.K. has historically been a world leader in quantum mechanics. Much of today’s quantum mechanics was developed in the U.K., especially in the world-renowned Cavendish Laboratory at the University of Cambridge, which was famously home to Paul Dirac, one of the godfathers of quantum computing. This academic leadership is what attracted me to the U.K. as a foreign student in the first place.
Strategically building on that foundation, the U.K. was the first nation to launch a national quantum strategy in 2013, with £1 billion behind it. It comprised a decade-long plan to move the needle for U.K. quantum from academia into industry. It supported venture capital firms that were deeptech savvy, such as Amadeus in Cambridge or Oxford Science Entreprises, to name but a few. This gave rise to multiple quantum spinouts that are now considered global leaders across the quantum computing stack. These companies have raised tens of millions of pounds each in seed and series A rounds, employ thousands of people in the U.K., and are ready to scale up and bring these incredible technologies to market.
This is already starting to pay off. Venture capital funding for early-stage quantum startups in the U.K. and EMEA more broadly has also significantly trumped the level of capital flowing into the space from across the pond in the U.S. Last year, VC funding raised for quantum startups in EMEA was more than triple that raised in the U.S. ($781 million vs $240 million). EMEA startups have therefore cashed in almost two-thirds of the $1.2 billion invested by VCs globally in the sector in 2023. The private investor interest, aptitude, and commitment to quantum’s potential in the U.K. and EMEA more broadly is plain to see.
In February 2023, a further £2.5 billion was promised to support U.K. quantum by the last Conservative government to be deployed strategically over 10 years. The goal of the funding was to accomplish five ambitious “quantum missions,” each of which with potentially huge benefits to society. While it has been announced, it has not actually been deployed as of yet. The government is currently undertaking a one-year spending review and there will be a multi-year spending review in the spring.
Right now, these world-leading startups are out looking for series B and C funding—the well-known point where U.K. and European funds have traditionally been too small to lead these sorts of rounds. When big technological breakthroughs happen, they have the potential to bring about new economic realities. New NVIDIAs and Microsofts of quantum will be born, and today, there is a large chance that one or more of these will come from the U.K. We are at the point in the quantum tech cycle where we could actually see hockey-stick growth soon, and in the next decade, hundreds of millions in returns to the U.K., creating a flywheel of innovation in the process. But only if we stay the course.
The new Labour government must build on previous success and continue to invest to bring world-changing innovations to fruition and scale. It must not reduce a winning bet just for the sake of playing it safe. The government, investors, and founders need to decide whether they’re investing to win, or simply not to lose.
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