UK’s quantum advantage will pay off, but government spending overhaul risks squandering it

The tech world moves more slowly than it portrays. Venture capitalists (VCs) often tell their LPs that returns last between five and seven years. Secretly, 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.

The last time the UK had a Labour government was 2010. No one had heard of Airbnb or Uber. SaaS was booming and the term “deeptech” was virtually unknown.

Over the past decade or so, the tech world has come to realize that sustainable incremental changes in growth and positive impact can’t come from software development alone. Major technological breakthroughs in the underlying technology are what not only create massive value, but also deliver long-term societal benefits.

For example, the rise of SaaS companies was driven by underlying growth in computing capacity, supported by semiconductor development and the advent of scalable cloud computing. Twenty to thirty years ago, the UK semiconductor leader Arm and others were innovative, small, venture-backed and government-backed teams led by ambitious and visionary founders.

There are early-stage technologies now that will have the same impact. If we take the evolution of computing as a case study, we need to focus on the next frontier in computing to understand what it will look like in 20 years: quantum computing.

Quantum computing is a complete departure from how we have done computations 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 very small scales, and one day be able to design and predict how atoms come together to form everything around us.

Quantum computing is not only expected to add an additional £1.3 trillion to global GDP, across sectors including automotive, chemicals, financial services and life sciences, but it will also be one of our best and most important tools to tackle some of the world’s biggest challenges, such as the climate and energy crises.

The UK has historically been a world leader in quantum mechanics. Much of today’s quantum mechanics was developed in the UK, particularly at the world-famous Cavendish Laboratory at the University of Cambridge, home to Paul Dirac, one of the godfathers of quantum computing. This academic leadership is what initially attracted me to the UK as an overseas student.

Strategically building on that foundation, the UK was the first country to launch a national quantum strategy in 2013, with £1 billion behind it. It included a ten-year plan to move the needle for UK quantum from academia to industry. It backed deep-tech-savvy venture capital firms such as Amadeus in Cambridge or Oxford Science Ventures, to name a few. This led to multiple quantum spin-outs that are now considered world leaders in the quantum computing stack. These companies have each raised tens of millions of pounds in seed and series A rounds, employ thousands of people across the UK, and are poised to scale and bring these incredible technologies to market.

This is already starting to pay off. Venture capital funding for early-stage quantum startups in the UK and EMEA more broadly has also significantly outpaced the amount of capital flowing into the sector from overseas in the US. Last year, VC funding for quantum startups in EMEA was more than three times that of the US ($781m versus $240m). EMEA startups will therefore have captured almost two-thirds of the $1.2bn invested in the sector by VCs globally in 2023. The interest, appetite and commitment of private investors to the potential of quantum in the UK and EMEA more broadly is clearly visible.

In February 2023, a further £2.5 billion was pledged to support UK quantum by the last Conservative government, to be deployed strategically over 10 years. The aim of the funding was to deliver five ambitious “quantum missions”, each with the potential to deliver huge benefits to society. Although announced, it has not yet been deployed. The government is currently conducting a one-year spending review, with a multi-year spending review due to take place in the spring.

Right now, these leading startups are looking for Series B and C funding, the famous point at which UK and European funds are traditionally too small to lead these types of rounds. When major technological breakthroughs happen, they have the potential to trigger new economic realities. New NVIDIAs and Microsofts of quantum will be born, and today there’s a good chance that one or more of them will come from the UK. We’re at the point in the quantum technology cycle where we could soon see real hockey stick growth, and hundreds of millions in returns to the UK over the next decade, creating a flywheel of innovation in the process. But only if we stay the course.

The new Labour government must build on past successes and continue to invest to bring world-changing innovations to fruition and scale. It must not reduce a winning bet to play it safe. The government, investors and founders must decide whether to invest to win or simply not to lose.

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