Britain’s technology debate is obsessed with unicorns. Politicians celebrate whenever a startup is valued at more than $1bn, treating it as proof that our innovation economy is working.
And Britain does have much to celebrate. Our technology ecosystem is currently valued at $1.3trn and has produced 199 unicorns and billion-dollar exits, more than any country in Europe.
But those headline figures conceal a more troubling story: nearly three quarters of the venture capital raised by UK startups in 2025 came from overseas.
Britons are good at creating valuable technology companies. But our policies are much less successful at providing the capital and conditions needed for startups to build long-term futures here.
The challenge for Andy Burnham is not just producing more unicorns. The PM needs to focus on the small and medium-sized tech enterprises (SMEs) developing new products, training skilled workers, and exporting around the world from every postcode.
In 2021, the UK app economy produced £74.8bn and supported more than 400,000 jobs. Much of this activity is driven by SMEs. But as one startup member of the Association for Competitive Technology (ACT) told us: “It’s almost impossible to make the business case for staying in the UK right now.”
The solution isn’t shutting out international investment. We need to make Britain a place where technology companies can remain independent, scale, deliver localised economic growth, and pay taxes.
That is a big job. But there are small changes that can drive massive effects. Firstly, through closing the funding gap that pushes promising businesses towards an early sale. And secondly, by creating a fairer system for licensing standard-essential patents (SEPs).
Closing the funding gap
On the surface, the capital market looks healthy. Britain remains Europe’s strongest venture-capital market with startups raising $23.7bn in 2025, a 33 per cent increase on 2024.
But where that money comes from matters. With 74 per cent arriving from overseas, the problem is overdependence. When British companies must look abroad for the money to scale, pressure grows to relocate, list overseas, or accept an earlier acquisition.
The problem is also geographic. London-based startups received three-quarters of all UK venture capital in 2025. That left founders across the rest of the country competing for just a quarter, despite ministers’ ambitions to spread growth and opportunity throughout Britain.
Founders consulted by ACT for our recent report, Funding the Founders, identified a “black hole” between £250,000 and £1.5m for businesses that are beyond seed support, but are not yet large or profitable enough to attract conventional venture capital. This middle-stage growth is precisely when a business needs to hire its first substantial team, finish developing its product, and secure major customers.
An inability to raise capital at this stage can leave founders with little choice but to slow down, move abroad, or sell early.The Treasury should raise the £250,000 limit a company can secure through the Seed Enterprise Investment Scheme (SEIS) to £1.5m.
This will promote SME growth across the UK, improve startups’ transition into the Enterprise Investment Scheme (EIS), and help SMEs attract angel and regional investment.
Standards and SEPs
Key interoperability standards permit smart devices to seamlessly communicate with one another.
When patents are infused into these standards – known as standard-essential patents (SEPs) – licensing them on fair, reasonable, and non-discriminatory (FRAND) terms becomes critical to any SME looking to compete across consumer and enterprise markets.
The UK Intellectual Property Office (IPO) has identified serious issues in the UK’s SEP licensing framework with respect to transparency, unequal access to information, and the complexity and cost of resolving disputes that some SEP holders are exploiting to avoid FRAND obligations.
Imagine a British SME developing a smart energy product. They spend years, before going to market, building a product on top of standards, assuming SEP holders will provide FRAND licenses as they committed. When a SEP holder walks back on their FRAND commitment, the SME can face existential risks, including unsustainable legal costs or the threat of an injunction preventing them from selling their product at all.
For large companies with deep pockets and multiple product lines to distribute risk across, such disputes are par for the course. For a tech SME, it can be a death knell.
Strong intellectual property rights are essential to innovation. In fact, the FRAND commitment protects patent rights by assuring SEP holders will receive a fair licensing fee from any use of their patented technology to meet the standard. But we must have a SEP licensing market that is transparent, proportionate, and accessible to companies of all sizes. The Burnham government should see through the IPO’s work to reform SEP licensing.
The IPO has consulted on numerous important and needed proposals including the establishment of an independent patent “essentiality-checking service”, improving transparency around SEP licensing terms, and ensuring SMEs can resolve disputes without risking ruinous legal costs. Such a change is easy to deliver and will make a world of difference to tech companies across the country.
At Labour Party Conference, ministers will rightly talk about growth, industrial strategy, and spreading opportunity to every postcode.
Those ambitions will only be achieved by building an economy in which ambitious British businesses can remain independent, scale, and create prosperity. And that would be a legacy of which every Labour minister, member, and supporter could be proud.
Related
