Anchoring the UK’s Tech Leadership in a New Fiscal Reality

It is no surprise that the Chancellor of the Exchequer, Rt. Hon. Rachel Reeves faces an insurmountable challenge as she finalises her Autumn Statement on the 26^th of November. The fiscal reality the UK is navigating is sobering. Nevertheless, in a globally inter-connected world, where geopolitical tensions have flared and major economies are aggressively competing, one could argue that this is a make-or-break moment for the UK’s Tech Sector.

The race for tech leadership

The US, EU, and China are acting strategically on technology, explicitly acknowledging it as a current and future driver of their economies in terms of growth, security, and resilience. The US CHIPS and Science Act (2022) and Inflation Reduction Act (2022), the EU’s European Chips Act (2022-2023) and the Horizon Europe and Digital Europe Programme, and China’s National AI Development Plan (2023) all set out clear long-term policy intent and put the government budget at the heart of driving transformative outcomes in AI and other frontier technology.

The UK is not without a strategy. The recent Modern Industrial Strategy (2025) lays out a 10-year vision for boosting business investment, fostering growth in key sectors, and enhancing the overall economic landscape. The National Quantum Strategy, backed by GBP 2.5 billion over 10 years (2024–2034) for quantum research and commercialisation, and the UKRI Technology Missions Fund, a GBP 320 million fund to back ‘technology missions’ in AI, quantum, engineering biology, and future telecommunications, are central pillars of this approach. Similarly, the HMRC’s R&D Tax Credits regime has recently been reformed to improve efficiency and address abuse.

The UK’s innovation economy was estimated at USD 1.3 trillion in the middle of the year[1] and is ranked first in Europe for venture capital. However, a more recent report[2] from the Parliamentary Committee on Science and Technology casts a less positive view. Highlighting a ‘failure to scale’, it argues that science and technology companies that start up in the UK face a deep-rooted problem that has now reached a crisis point, adding that ‘the UK’s inability to retain economic benefits of its R&D is a fatal flaw to any growth strategy’.

From strategy to delivery: five priorities

How can the UK ensure its tech ecosystem remains globally competitive and drives tangible benefit for the economy?

The UK leans into its strengths and enhances regulatory certainty

The UK is recognised as a leader in regulatory innovation. Its use of sandboxes, its leadership on digital governance – including through the UK’s Digital Regulatory Cooperation Forum – and its innovation sandboxes are genuine strengths. But regulatory uncertainty still exists around the regulation of AI and data in the post-GDPR era. The UK should extend and better resource regulatory sandboxes (in AI, data, and quantum) and implement a national AI conformity assessment pathway, including mutual recognition and regulatory cooperation with the US under the new US-UK Tech Prosperity Deal. Not only will this reduce compliance friction, it will attract firms who want clear rules and market access.

Co-investment PPP funding at scale

Across all major innovation economies (the US, EU, Singapore, Germany), public-private partnerships (PPPs) have become the primary mechanism for risk-sharing and for scaling emerging technologies from lab to market. The UK has built credible PPP models in quantum through the UK National Quantum Strategy (2023), a 10-year GBP 2.5bn programme, and in connectivity through Project Gigabit, a GBP 5bn programme with private-sector matching. However, the current provision of investment incentives and funding from government is considered too short term and too focused on smaller grant funds, rather than on public-private capital co-investment – the approach taken by the US, EU, and China. The UK should establish a frontier technologies PPP fund, a co-investment vehicle for long-horizon PPPs available for capital-intensive projects. It would focus on the mission areas of the Science and Technology Framework, namely AI, quantum, engineering biology, semiconductors, and future telecoms (6G, open networks).

Targeted R&D & capital incentive for digital/AI/deep tech

The merger of the SME R&D tax credit scheme and the Research and Development Expenditure Credit (RDEC) into a single scheme has simplified the regime and has been welcomed by industry. However, greater scale is required to support scale-ups and capital-intensive infrastructure. The UK should add a temporary enhanced tax credit or investment credit specifically for AI-grade capital (GPUs, cooling, power infrastructure) and for investment in intangible assets (software and models). This would not only encourage rapid private capital expenditure on compute and software IP but also reduce the cost of building domestic capabilities.

Attracting talent and tech-focused immigration through fast-track tech routes, family and founder rights

The US, Canada, and Singapore are racing to attract top tech talent, offering fast-track visas, low fees, and clear settlement paths. The UK still lags on speed, cost, and flexibility, and recent changes to settlement timeframes send a message. Talent chooses certainty and family security, and these features are decisive in global competition. The UK has long been a top destination for talent, but other markets are catching up quickly. The UK should establish fast-track processing for Global Talent and Tech Founder visas, lower or waive fees for top-tier hires, introduce rapid settlement pathways for exceptional tech hires, and restore robust dependant rights.

Government as first customer

The public sector is one of the largest customers in an economy. The UK government should reform public procurement to leverage its buying power to create demand for domestically developed tech. This should include multi-year procurement commitments for UK tech, with mandatory targets and dedicated set-asides for SMEs and start-ups. These measures would not only help to create a market but also support the scaling of businesses and demonstrate confidence to private investors.

The UK does not need to copy the US or the EU, but it must match their scale and clarity. It has the talent; what it needs now is fiscal certainty and long-term commitment to anchor the UK’s tech leadership.

[1] UK Innovation Update Q2 2025 I HSBC Innovation Banking

[2] Bleeding to death: the science and technology growth emergency