Key Takeaways
- • The Public Accounts Committee, chaired by Sir Geoffrey Clifton-Brown, urged UK Research and Innovation (UKRI) to abandon its near-exclusive reliance on non-repayable grants and take equity stakes in a broader range of publicly funded businesses.
- • The committee argues equity stakes would let taxpayers share in returns when funded companies achieve lucrative exits or IPOs, framing the change as a value-for-money issue.
- • The report says UK university spinouts and patents are generated more efficiently per pound of research funding than in the United States, but promising startups often relocate overseas to obtain scarce late-stage growth capital.
- • Universities' traditional demand for equity stakes in their spinouts, sometimes above 50 percent, deters external venture capital investors, according to the committee's analysis.
- • The committee wants the Department for Science, Innovation and Technology to move beyond measuring grant volume and apply rigorous metrics to show whether support schemes help British companies scale.
Summary
The Public Accounts Committee has criticized UK Research and Innovation (UKRI) for an overly cautious approach to commercializing publicly funded research, calling for a shift toward a venture-capital model in which the state takes equity in the technology startups it backs. Committee chair Sir Geoffrey Clifton-Brown acknowledged that the recommendation is unusual for a body typically focused on restraining public spending, but argued that the leading technology nations did not reach their positions by avoiding entrepreneurial policy and that the state must accept calculated risks to secure long-term economic returns.
According to the committee's report, British universities generate more spinouts and patents per pound of research funding than their US counterparts, yet the UK struggles to retain and scale these companies. Many startups relocate overseas to secure late-stage growth capital that is scarce domestically, taking their intellectual property and future tax revenues with them. MPs want UKRI to review its standard terms and take direct equity in a broader set of beneficiaries of public money so that taxpayers share in exit and IPO gains.
The committee also points to structural obstacles within UK academia. Universities have traditionally demanded large equity stakes in their spinouts, sometimes exceeding 50 percent, which discourages external venture capital investors. The report suggests a more coordinated national approach to equity distribution could unlock private investment that currently bypasses the UK. The Department for Science, Innovation and Technology has previously acknowledged the efficiency of UK academic research but describes the translation into scalable businesses as patchy. The committee contrasts this with the US model, where the Bayh-Dole Act, DARPA's operating model and aggressive university technology transfer offices have helped the US dominate commercialization of technologies from the internet to modern biotechnology.
The government has pursued targeted support in the meantime. UKRI provides AI startups with free access to taxpayer-funded supercomputing resources, and the department altered public procurement rules to help domestic firms compete for £400 million in contracts for specialist AI chips. The state-owned British Business Bank has begun investing alongside private pension funds to take stakes in high-growth firms. However, efforts to unlock UK pension capital for domestic tech investment have progressed more slowly than ministers anticipated.
The committee now demands that the department measure outcomes rather than grant volume, applying rigorous metrics to determine whether schemes enable British companies to scale or simply subsidize research that benefits foreign economies. Analysts cited in the reporting warn that without restructuring how public research is capitalized, the UK risks remaining a highly efficient research laboratory for the world rather than the primary beneficiary of its own breakthroughs.
According to the committee's report, British universities generate more spinouts and patents per pound of research funding than their US counterparts, yet the UK struggles to retain and scale these companies. Many startups relocate overseas to secure late-stage growth capital that is scarce domestically, taking their intellectual property and future tax revenues with them. MPs want UKRI to review its standard terms and take direct equity in a broader set of beneficiaries of public money so that taxpayers share in exit and IPO gains.
The committee also points to structural obstacles within UK academia. Universities have traditionally demanded large equity stakes in their spinouts, sometimes exceeding 50 percent, which discourages external venture capital investors. The report suggests a more coordinated national approach to equity distribution could unlock private investment that currently bypasses the UK. The Department for Science, Innovation and Technology has previously acknowledged the efficiency of UK academic research but describes the translation into scalable businesses as patchy. The committee contrasts this with the US model, where the Bayh-Dole Act, DARPA's operating model and aggressive university technology transfer offices have helped the US dominate commercialization of technologies from the internet to modern biotechnology.
The government has pursued targeted support in the meantime. UKRI provides AI startups with free access to taxpayer-funded supercomputing resources, and the department altered public procurement rules to help domestic firms compete for £400 million in contracts for specialist AI chips. The state-owned British Business Bank has begun investing alongside private pension funds to take stakes in high-growth firms. However, efforts to unlock UK pension capital for domestic tech investment have progressed more slowly than ministers anticipated.
The committee now demands that the department measure outcomes rather than grant volume, applying rigorous metrics to determine whether schemes enable British companies to scale or simply subsidize research that benefits foreign economies. Analysts cited in the reporting warn that without restructuring how public research is capitalized, the UK risks remaining a highly efficient research laboratory for the world rather than the primary beneficiary of its own breakthroughs.
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