Quite a few people have taken a swing at the UK tech sector recently. Tom Blomfield, Monzo’s founder, said he’s leaving London for the “more tech-friendly” US, and Blossom partner Ophelia Brown said London is losing its lead as Europe’s tech capital.
But at the same time the UK government is on a quest to become a “science and technology superpower” — a mission led by the Department for Science, Innovation and Technology (DSIT), a new government body established in 2023.
Chloe Smith is currently serving as the secretary of state for that department — the minister tasked with supporting the growth of the country’s tech and startup sector.
We sat down with her on Startup Europe — The Sifted Podcast to discuss everything from the plan for spinouts to unlocking pension funds for tech investment — and if it's all as bleak as we think?
This interview has been edited for clarity. For the full conversation, listen to podcast.
Sifted: Tell us about how the DSIT was formed. What was the idea behind it and what exactly do you do?
Chloe Smith: The department is focused on the mission of the UK being a science and technology superpower within this decade.
We’ve also got an opportunity to do things differently and I think that’s really important in this new department. We are seeking to be an example of innovation inside government, we’re seeking to support other parts of government to be more innovative as well.
Obviously the UK is a leader in so many areas of tech and research and innovation. But from our vantage point, talking to startups and founders every day, you do hear concerns of founders. Is talent coming to the UK? Are the right sources of capital coming to the UK to support later-stage companies? Why do you think now people are feeling this sense of unease or crisis?
I can understand those concerns and in answer to every one of them you’ve got the government taking action. So, for example, on talent, we’re focused within this department on how to ensure a really strong pipeline coming forward from school age and college age and university age — and people in later life. For example, you could look at some of the announcements we made on supporting people to come into the skills that relate to AI.
On access to finance, you’ve got clear announcements from the chancellor on how we're supporting R&D, how we’re making sure we’ve got the tax reliefs to do that. You’ve also got a series of programmes around startup finance and scaleup finance.
There are really clear examples that many firms do see London as their home and the UK as their home, and I welcome that. But I can also understand that there may be anxiety more broadly — we’ve come through some pretty complex politics in the last decade, we’ve come through a pandemic, we’ve come through global supply chain shocks.
People say the UK could be doing even more — we could be having even bigger successes coming out of universities. What is the government looking at to help support that commercialisation of high-impact research?
We're focusing on R&D and the government is investing more on that — it's up by 30% in this spending review period. We’re also focusing on R&D through the perspective of firms and that’s through tax reliefs.
We’re also looking at ways we can be sure to support scaleups. You want to be able to have an environment that has business confidence, an environment in which you know that you can get the next set of lab facilities that you may need, and we’ve invested in world-class labs. You want to have an environment in which you might be able to expect a cluster of really exciting firms to be working around you.
One of the other missions that we have in this department is to identify and then support the really critical technologies that underpin so many other sectors that are transformative in their own right. For us, these are AI, quantum computing, engineering biology, semiconductors and also future telecoms.
Policy-makers, investors and founders are awakening to the importance of these kinds of strategic tech because with supply chain issues, we’ve seen how fragile our economies can be. How do you think about the role of tech in that geopolitical framework?
I think we can all see that actually every nation is having to think like that. We’ve seen some pretty extreme examples of the need for supply chain resilience on a global scale.
So the UK government is taking a very forthright attitude here, which is that in those five technologies we want to signal UK strengths and ambitions. We want to invest in the R&D, invest in the talent, invest in the skills that will support those sectors being the best that they can be.
We also know that we can play a very important role convening like-minded allies to consider the guardrails that may be needed to have this technology developed in the most safe and responsible manner. All of that will in turn help supply chains at home, but I hope create a more stable international order.
There’s a lack of US regulation on AI and then the EU is looking to enact some pretty stringent regulation around AI. What do you think is the right approach to AI regulation?
We think that we can deliver that pro-innovation approach, that agile and flexible approach, by using the existing regulation that we have and the existing regulators to check that the regulation is correct.
But we do feel it would have been too cumbersome and long to essentially rework the entire legislative architecture in the way, for example, the EU has. We think instead it is much better to be able to keep pace with a technology that is moving this fast, and we do that by drawing on our regulation rather than legislation.
Tom Blomfield, who founded neobank Monzo, recently moved to Silicon Valley and one of his comments was that US capital markets are more accepting of tech companies. And companies like [chipmaker] Arm, for example, have said they could list in the US for similar reasons. How can the UK mobilise later-stage capital and create an environment for innovative companies to make the jump from private to public? And are pensions part of that?
We’re doing some quite detailed work actually in terms of listings. Lord Hill reviewed listings, and there’s an amount of work going on to boost the attractiveness of the UK capital markets in that specific way.
Turning to pensions and the possibility of getting more investment that way, I’m actually really excited about this, and indeed I formerly led the Department for Work and Pensions, and we were able to take some steps to unlock and begin to legislate for how we can achieve these goals. The chancellor is really clear that this is actually one of the biggest pieces of work he’ll be doing this year.
He’s doing it for that key reason — of gaining benefits for the economy, growing the economy and then gaining benefits for the citizens. Because of course, that’s what we believe in Britain, right? We are pro-innovation because business is the source of growth in the economy and the source of jobs and opportunities for people. So he's taken forward a review about how we get greater investment into science and technology. It goes by the name of LIFTS [long-term investments for technology and science].
I see no reason why the UK and its pension landscape shouldn’t be able to sustain some real boldness. We talk often enough, don't we, about the Canadian pensions landscape? Let's hear it for Canadian teachers, their pension fund does it for everybody, don’t they? But let’s raise our sights in the UK.
People would have a piece of that innovation — these are going to be the next huge companies in our economy. So it’d be good if everyone could get a piece of that.
I think that’s absolutely right, because of course if you do this right then it strengthens the pension funds themselves, which is critical. We should be looking to do this kind of move in a way that’s win-win, because you’ve got to be able to give people — continue to give people — the pension security they deserve from their funds, whilst securing those benefits.
