Britain risks falling behind in the global tech race unless the government takes greater risks backing British startups, the chairman of Parliament’s spending watchdog has warned.
In a report published on Wednesday, the Public Accounts Committee (PAC) urged UK Research and Innovation (UKRI) to take more equity stakes in companies it funds, arguing taxpayers are missing out on the returns from successful British inventions.
Committee chairman Sir Geoffrey Clifton-Brown told City AM that the government must do more to help promising startups grow in Britain rather than lose them to overseas competitors.
“The taxpayer that after all put the seed corn funding into that organisation, to invent the idea and then hopefully scale it up, should, when it becomes successful, get a fair return on its money”, he said.
The report found that while British universities produce more spinouts and patents relative to research funding than their US counterparts, UK firms struggle to raise the capital needed to scale.
The UKRI was accused of being “far too cautious” in its approach to intellectual property (IP) and taking stakes in businesses.
Clifton-Brown said small equity stakes or IP rights could help taxpayers benefit from successful investments without discouraging innovation.
He also warned that weak IP protections could let foreign competitors profit from British research.
!There are some countries in the world that will then take that idea, because it’s not got an IP registration attached to it, and develop it, and then come back and outcompete our own companies”, he told City AM. “Now that’s just daft”.
The warning comes as ministers face growing pressure to stop Britain’s most promising tech companies moving abroad.
Earlier this month, founders of British AI startups including Elevenlabs and Synthesia called for an overhaul of employment restrictions they say are holding back growth and leaving UK firms struggling to compete with Silicon Valley.
Meanwhile, recent figures showed the number of university spinouts linked to research council funding more than halved between 2020 and 2024, falling from 173 to 85.
Ageing facilities threaten UK research
The committee also warned that ageing research facilities and poor planning threatened Britain’s competitiveness in AI, quantum computing and other emerging technologies.
Around 45 per cent of the Science and Technology Facilities Council’s estate is in an unacceptable condition, while restoring university-owned research facilities would cost £5.6bn.
The report criticised UKRI for spending £46m upgrading its airborne laboratory before cancelling the project.
“They ought to have been able to work that out before they put £46m investment in”, Clifton-Brown said, arguing that better planning could have prevented the loss.
The watchdog also flagged an expected 13-month gap between the closure of Britain’s Archer2 supercomputer and its replacement.
The concerns come as the government seeks to strengthen Britain’s position in emerging technologies, having committed £500m to a Sovereign AI Fund and pledged greater investment in domestic computing infrastructure.
“I think you do need to, in certain technologies, have a sovereign capability”, Clifton-Brown told City AM. He added, “If you just sit back and let somebody else do it, you don’t know what’s going to happen in the future.”
The report also found that half of UKRI funding goes to London, the South East and East of England, despite the North’s share rising from 12 to 20 per cent over five years.
The committee urged UKRI to review its funding terms, improve oversight of failing projects and set clearer regional investment targets.
“The nations currently leading the global tech race did not achieve their positions by avoiding more entrepreneurial policies”, Clifton-Brown said. “This is a simple case for the government of nothing ventured, nothing gained”.