AI and Creative Technologies (Communications and Digital Committee Report)

Baroness Wheatcroft Excerpts

Friday 13th June 2025 Lords Chamber

[Baroness Wheatcroft (CB)]

My Lords, we are here to discuss a really important issue. I am delighted that the noble Baroness, Lady Stowell, was able to secure the debate. As a member of the committee that worked on the report, I am indebted to her for her tireless efforts as chair of that committee—not just for all the behind-the-scenes work but for pulling together such a disparate group of people, often with disparate views, and bringing together something that I hope will be seen as really worth while. I also thank the staff who served us so well and made a positive contribution to our efforts.

If the country is to stand a chance of securing the growth it seeks, then the sector we are discussing today will be a crucial engine to get us there. The Chancellor of the Exchequer was absolutely right to say

“we want nothing less than to make the UK the technology centre of Europe. This is the path we need to take to create new jobs, new growth and new prosperity in every corner of our country”.

No one would argue with that. However, it was not Rachel Reeves who said this; those were the words of George Osborne, quoted in a 2014 report of what became the ScaleUp Institute. Ten years later, the ambition remains intact, but so do many of the problems that UK companies spotted then which prevented them fulfilling their potential and scaling up. Many of those obstacles apply to all sectors. There are some, however, that particularly afflict AI and the creative tech industries.

Writing 10 years after George Osborne, the noble Lord, Lord O’Neill of Gatley, referred to the “valley of death” that continued to lie in wait for too many of the companies which successfully start in the UK. We are still a wonderful country in which to start a business and our rate of entrepreneurship is second to none, but those companies come to an early end far too often. The noble Lord, Lord O’Neill, was penning the foreword to the latest report from the ScaleUp Institute. Although that report is positive about the achievements of the past 10 years, it acknowledges that many of the issues addressed in 2014 remain problematic now. The UK is an innovative developer in AI as well as the creative tech sectors—indeed, we are a leader in creative tech in many ways—but, as our report stressed, unless we can provide, quickly, the environment necessary to enable those companies to scale up, and with them many other businesses, they will leave.

As the noble Baroness, Lady Stowell, wrote and says now, we are in danger of becoming an “incubator” country for other economies that will happily take our talent and help them scale up. We took evidence from a wide base, including some really exciting and enthusiastic entrepreneurs. They were by no means unanimously critical of the environment they found themselves in, and their asks were not greedy. The loudest call, echoing that of a decade earlier, was the one that the noble Baroness, Lady Stowell, referred to: the spaghetti of different grants and apparent help that would be on offer if they could access it. Some of them told us that in fact they had to pay consultants to help them find a way through the morass of stuff that was on offer and, by the time that they had done the sums, it was just easier and more cost effective to manage without.

That does not sound like much progress on 10 years earlier. We are assured that the British Business Bank is on the case. I am not a cynic; I like to believe it is. But—I think like most of us—I would like to see the evidence. So I will withhold my judgment until I can see the road map that will enable an ambitious AI company or a creative tech company to know just where it should go to access, at one step, the help that it needs to become a growing business. The unicorns, as we have heard, are escaping the country, and we cannot afford to lose them.

To help along that journey, I think that specialist hubs are the answer. We have heard about this in the past. I hope that the Minister will be able to tell us a little more about how these hubs are taking shape. At their best, they should be the answer, providing not just information, mentorships and the sort of mutually supportive ecology that we need but the compute that is required. It may not be on the scale that we have heard in the past, because some of the AI companies are capable of being very efficient in their use of AI. If we look at what is going on in China now, we see that the compute required is a fraction of what we used to think was essential. Nevertheless, putting things together in specialist hubs around the country will not only spread the gains but spread the pain.

I hope we will be able to hear more about that. We are waiting for the latest incarnation of the Government's industrial strategy. As ever, more detail would be much appreciated—as much as the Minister can give us today. Specifically, AI needs to be assured that the Government will not go backwards and forwards, as it did on the Edinburgh scheme. Without wishing to venture too much into territory that has caused such pain, as the noble Lord, Lord McNally, referred to in some detail, the issue of copyright hangs over the AI sector. If our specialist AI companies are to thrive, they need to know exactly what environment they are working in and what they are going to be using.

Any uncertainty is a deterrent to investment, and so it is with uncertainty over the future for fundraising and the exact proposals on pension funds. Personally, I share the qualms of the noble Baroness, Lady Stowell, about dictating where pension funds should invest my money, but the idea of putting funds together to give them more clout and therefore spread the risk means that they should be capable of investing a little more in UK companies and more risk-taking ventures.

Creative tech has different issues, however. There needs to be a broader understanding of what a large industry this is and how highly the UK is regarded in it internationally. A deeper appreciation of the value of special effects in theatre and movies, for instance, would have a very special effect on investment in that sector, where we are still a leader. The difficulty in keeping talent is a common refrain among tech companies. Higher salaries are part of the draw, but not everything. An appreciation of the value of wealth creation needs to be filtered through from an early age in this country. This is Money Education Week, and I would like to think that one of the spin-offs will be an understanding that wealth creation spreads among the population; it does not just create people who are going to spend an awful lot on handbags and so on.

Another reason why enabling companies to scale up in the UK is so crucial is to spread the wealth. Making employee share schemes generous and deep is another way that can help to do that. I would like to hear more from the Government about how they propose to make everyone a shareholder, or at least an investor, in the company in which they work. It has long been a discussed ambition in this country, but it does change attitudes. So I hope that we will hear something positive from the Minister today. I am not downhearted. We have the talent; we just need to channel it a little more effectively.