Investment into quantum computing has “huge potential” for London, according to the science minister, after UK venture capital (VC) deal activity in the emerging technology hit a record high last year.
Speaking about investment into quantum, Andrew Griffith told City A.M. he believes “there is huge potential for the City to gain exposure to some of the fastest growing parts of the economy”.
Griffith was speaking as he visited the University of Nottingham spin-out company Cerca Magnetics, which has used quantum to help detect early signs of dementia.
“These are the technologies of the future. They’re going to create big successful companies,” he said.
According to the latest Pitchbook data, shared with City A.M., the value of quantum computing VC deals in the UK surged to over £200m in 2023– up from around £57m the year before.
Created with data from Pitchbook
The trend is reflected globally, with a record 92 deals reported worldwide in the sector last year, although the total value of these fell to $1bn in 2023, down from $1.8bn in 2020.
On Monday, the minister pledged £45m to propel the UK’s quantum computing sector, as part of the British government’s ambition to become a science and tech ‘superpower’.
Of the funding, £30m will fuel the development of quantum computers, while £15m will go to the Quantum Catalyst Fund for public sector projects.
Quantum machines are able to rapidly make highly complex calculations that cannot be done by regular computers.
Griffith said he wants to create a “quantum-enabled economy”, which harnesses the practical uses of the technology in sectors like healthcare and chemistry.
Welcoming the government’s funding, partner at EY analytics and AI lead, Lee Brown, said quantum is a “nationally critical future technology” that provides a “significant opportunity” for the UK, which is already home to the largest number of quantum start-ups in Europe.
“The UK has all the attributes to become a scientific and technologic superpower – it’s already home to relevant industrial players and boasts a vibrant R&D environment,” he added.
The funding is part of the government’s national quantum strategy, announced in March 2023, in which it pledged £2.5bn over the next decade to develop the technology.
One VC firm, Oxford Science Enterprises, is heavily involved in the UK’s pipeline of quantum research and development.
Sam Harman, a principal on Oxford Science’s deeptech investment team, said the impact of quantum computing would be “transformative” given its power to solve complex problems and find solutions for AI, drug discovery and new materials.
But he added that investors interested in quantum need to take a long-term view, as “the technology is still in its nascent stages and we’re just starting to see significant traction”.
The hardware needed for quantum is extremely costly, and so companies will need large amounts of capital to scale successfully.
“We need to continue focusing on bringing in funding to the quantum sector, through private capital, support from the UK government, and continued collaboration between start-ups and major corporations, to help the next generation of quantum companies evolve into global market leaders,” Harman explained.
The minister also said there is still “some work to be done” on investors’ understanding of quantum technology.
The government is trying to encourage private investment into technology because it wants to keep hold of more of its startups and scale-ups, many of which often get bought by US firms before they can provide real value to the UK economy.
It has established the Long-term Investment For Technology and Science (LIFTS) initiative, that is aiming to use pension funds to sink money into the UK’s most innovative science and technology companies.