Stuart Woods, COO of Quantum Exponential, discusses how the UK can propel innovation in its quantum start-ups.
To understand the challenges, achievements, and developments of the UK quantum ecosystem, it’s important to start with why quantum technologies are – and will increasingly become – so important.
The UK stands as a pivotal player within the quantum technologies landscape. Its start-ups, universities, and established private companies have demonstrated remarkable potential across the entire spectrum of quantum technologies.
These innovations span the domains of quantum computing, networking, sensing, and encryption, with notable entities like Universal Quantum and Oxford Quantum Circuits, two of the world’s most promising quantum computing start-ups, and Cerca Magnetics, a quantum start-up developing quantum sensing technologies for medical applications, calling the UK home. These companies wield substantial influence within the UK, Europe, and globally.
The UK’s leading universities have birthed a cohort of high-quality quantum spinouts revolutionising their respective fields. The University of Birmingham recently spun out its first company, Delta g – a quantum sensing company developing gravity sensors with wide-ranging applications in smart cities, infrastructure, climate change mitigation, and civil engineering.
Nottingham spinout Cerca Magnetics collaborates with esteemed institutions like Great Ormond Street to develop and test its quantum-enhanced brain scanner. This technology is proving invaluable for detecting and devising remedies for epilepsy, especially in the case of afflicted children.
Why should we invest in quantum start-ups?
When considering the challenges and achievements of the UK, or any nation, within the quantum ecosystem, it’s paramount to start with the ‘why.’ Why invest in and cultivate a quantum ecosystem at all?
We can only engage in substantive conversations about the hurdles faced and the breakthroughs achieved by initially contemplating the stakes involved. These stakes are significant – revolutionary advancements in medicine, the formulation of effective climate change policy options, the creation of secure, interconnected cities, and the future of national security. In essence, we are discussing developing a set of quantum technologies to tackle the major challenges in the health and sustainability of society and the planet, as the Novo Nordisk Foundation’s Challenge Programme puts it.
Undoubtedly, the UK’s quantum start-up ecosystem is robust, and its growth has benefited significantly from a series of well-conceived strategic policies and incentives. However, certain legislative changes and challenges must be addressed head-on to sustain this momentum and ensure the prosperity of start-ups without undue reliance on restrictive parameters and institutions.
A commitment to tax incentives for research and development (R&D) has the potential to bolster the start-up scene. However, in April this year, legislative changes impacted the amount UK companies can claim in R&D tax credits. As a result, start-ups developing new quantum technologies can now claim less tax relief, while larger businesses receive increased R&D support. The policy change has been felt across the tech ecosystem. Still, the ripples will be felt strongest for start-ups developing quantum technologies with a longer go-to-market strategy and timeline to returns. Stunting innovation at this early stage in the life cycle will have a long-standing impact on the tech economy and ecosystem.
Notwithstanding this policy change, there are many bodies, both within and without government, with initiatives that stand up as shining examples of how a nation’s legislative decisions can catalyse technological leaps.
UK Research and Innovation (UKRI) is a prime example. UKRI has laid a strong foundation for the quantum start-up landscape to flourish by pooling resources and integrating research and innovation efforts across various sectors. Innovate UK’s, part of UKRI, role in funding and supporting early-stage ventures has been pivotal, fostering an environment where innovation is rewarded and risk-taking is encouraged.
Enacting policies that ensure sustainable growth and allow quantum start-ups to diversify their funding streams is also paramount, and this will happen not at an individual or fund level but at an institutional level. I was recently reminded that the UK made no money from the invention of the Erbium amplifier – the enabler for long-distance internet and communication – yet the UK funded the research. This attitude must be central to reforms and policies that impact disruptive technology development.
Pension fund reform
A visionary shift in the investment landscape requires pension fund restructuring to allow fund managers to invest in riskier asset classes like Deep Tech.
A report published earlier this year argued partly for the consolidation of the UK’s highly fragmented pension scheme landscape. In the report, Tony Blair and William Hague pointed out that “the UK has the second largest pensions market in the world, but despite this advantage, overseas pension funds invest 16 times more in venture capital and private equity in the UK than domestic public and private pensions do”.
Steps are being made in this direction in the form of the Venture Capital Compact, as part of which nine pension providers have signed up to allocate at least 5% of default funds into unlisted equities by 2030.
Enticing institutional investors to participate in technologies will allow quantum start-ups to look closer to home when it comes to putting their foot on the gas and scaling up, something that many start-ups have felt prevented from doing traditionally because they cannot get the necessary cash injection from inside the UK’s borders.
Should this trend with the VCC continue, turning from a sticking plaster into a genuinely innovative structural reform, then I think the future looks very exciting indeed for the UK’s quantum investment landscape.
Streamlining trade export controls
The UK’s quantum start-ups would benefit greatly from streamlined trade export controls. The US model of maintaining an Entity List of companies to which you cannot sell sets a precedent worth replicating.’
In the UK, the process of obtaining licences for each potential trade partner is arduous and time-consuming. Simplifying trade export controls through a well-defined list of prohibited entities would reduce friction in international business collaborations while maintaining national security.
Accelerated medical certification process for non-invasive quantum devices and support for quantum-based medical applications
Improving the process by which a company can obtain medical certification is a specific example which speaks to wider policy changes needed to accelerate and protect innovation in technology in the UK.
Quantum technologies have the potential to revolutionise non-invasive medical procedures, offering precise diagnostics and treatments. Yet the bureaucratic hurdles companies face when seeking medical certification can stifle innovation in this space. A streamlined and efficient process for certifying non-invasive quantum medical technologies is essential to expedite their deployment, saving lives and driving economic growth.
The UK is still very traditional in its approach to developing quantum technologies for medical applications. Welcome Leap, for example, only exists in the USA and not the UK. We must endorse and support a real strategic view of quantum medical applications separate from quantum computing. It is more important than ever to foster collaboration in this space – biologists and clinicians have a crucial role to play alongside quantum physicists.
For example, biologists need to ‘calibrate’ the quantum results produced by quantum devices. We need to set up programmes which include their skills, not alienate them.
Building on success: Ensuring quantum sovereignty
As we navigate the next phase of quantum technologies, the UK must maintain its position of strength by fostering a vibrant, self-sustaining ecosystem of start-ups.
Inspired by successes and lessons from within and beyond our borders, legislative changes can be the foundation for this endeavour. By expanding funding sources, simplifying trade regulations, and accelerating medical certifications, we can empower quantum start-ups to reach their full potential, bringing forth ground-breaking technologies that redefine our world.
The UK has a remarkable legacy of technological innovation, and our quantum start-ups stand poised to continue this legacy into the future. As stakeholders in this transformation, our collective responsibility is to craft a legislative framework that propels innovation, nurtures entrepreneurship, and ensures quantum sovereignty for future generations.
We can unlock nascent quantum potential in the UK through strategic policies and visionary legislative changes.
