Fighting for UK Plc and its great innovators means ditching the old Whitehall playbook, thinking afresh
Jim McConalogue, 3 June 2025
Much is said of the grand political ambition to support innovation and growth. Every MP and senior official wants to encourage certainty and stability, increase investment, reform the economy to drive up productivity, prosperity and living standards across the UK. This is all good and well but rarely do these warm wishes translate into how to get there.
Arguably, a big part of that problem results from the precise inability to bring any of our own serial innovators into government to tell Whitehall and ministers what to do, or what not to do. However, there are signs of willing. Ministers are on the cusp of publishing an industrial strategy that will channel support to key growth-driving sectors – most notably, in advanced manufacturing and defence.
So, at Civitas, a recent study by Phil Radford – A Nation of Innovators – went out and asked the innovators in the field of advanced manufacturing at Bessemer Society what is required from long-term strategy. To be helpful, he worked to provide solutions to identifiable barriers to growth faced by these innovators, and suggested practical measures that will boost advanced manufacturing in the UK. The study drew on the business experience of innovators and serial entrepreneurs, who have all founded companies to develop smart innovations in the UK.
In the long-term, major innovation in technologies will help determine the ability of the country to raise its economic growth and productivity. There are an inordinate number of factors to consider including how to access finance for commercialisation, support for the regulatory and intellectual property (IP)
systems, innovation opportunities, skills, people and talent, the adoption and diffusion of knowledge and processes, and so the list goes on.
One leading obstacle is the lack of liquidity in UK growth capital. Excessive venture capital stakes mitigate further growth. There is no tax incentive for UK pension funds to put money into UK startups. UK venture capital seems more risk averse than in the US.
So, why not help the British Business Bank or the National Strategy Security Investment Fund to act as a cornerstone investor in advanced manufacturing SMEs. Alternatively, Innovate UK should be given an investment pot to act as a ‘cornerstone’ investor.
On banking facilities, the report found a breakdown in very basic banking access. Many reported that in some instances it has become ‘extremely difficult’ to open a bank account, owing to anti-money laundering rules. For dual-use tech firms, innovative companies that develop technologies with military
applications report that it can be ‘impossible’ to obtain bank accounts.
So, why not encourage the Financial Conduct Authority to move from a ‘risk minimisation’ to a ‘risk management’ model – at least to make life easier for SMEs. Although there is some claim that this challenge is being dealt with, the Government should urgently ask the FCA to examine banks’ lending policies towards small defence companies and companies with dual-use technologies.
After all, the news this week is currently full of big announcements on defence innovation and equipment manufacturing (envisaged through the Strategic Defence Review). But unless banking facilities become easier to access, the new UK Defence Innovation (UKDI) will flounder. If government wants to press
ahead with that organisation at pace to drive innovation and reform in defence and the use defence as an engine of economic growth, it will also need to reform parts of procurement to do so.
Sadly, the cards are stacked against small but highly innovative companies when it comes to procurement. As Radford argues, the dice are loaded towards incumbents. In practice, a strict, ‘lowest price wins’ procurement will always preference established global suppliers. This is because they have more resources to commit to tendering and compliance.
To resolve problems, for example, the Government could in principle model the new UKDI organisation on US equivalents. The agency need only be small. It should provide a straightforward commercial pathway for SMEs to meet and discuss defence challenges, and how to quickly test solutions. They should
engage proactively with the innovator community on defence challenges and opportunities. They should also provide rapid pathways to small, revenue-generating contracts. Successful pathways for procurement in defence will arguably deliver more successful efficient pathways for procurement in health.
The shaping of the industrial strategy itself is key. It should be independent. Entrepreneurs starting up innovative companies emphatically support ‘long- termism’ for the industrial strategy. The government are getting halfway there, with a statutory Industrial Strategy Council, hardwiring stability and long-termism. But innovators believe that permanence in strategy requires some de-politicisation and it should be accountable for its performance.
Would it harm to have a strategy owned a little bit more by people with experience of innovation and commercialisation? Priority should be given to serial innovators, and CEOs of high-growth SMEs and entrepreneurs. It should not be staffed with executives of multinationals.
The benefits to the economy are significant. If Britain gets better at commercialising home-grown intellectual property, we can grow large, advanced-manufacturing businesses. We can build competitive advantage in UK technologies. And we can anchor supply chains and high-value jobs here in the UK.