The government is preparing to take larger equity stakes in fast-growing British technology companies as ministers try to keep more scale-ups headquartered, financed, and listed in the UK.
Business Secretary Peter Kyle has signalled a more interventionist approach to industrial strategy ahead of London Tech Week, with taxpayer-backed investment expected to be deployed alongside private capital in larger and more active positions.
The policy marks a move beyond conventional grant funding and tax incentives towards a state-backed investment model that gives Whitehall a closer role in companies judged to have strategic growth potential.
Kyle said: “You are going to start to see us take more risks.” He added: “I want us to be aggressively ambitious.”
The government’s argument is that the UK has a strong record of producing technology companies, research spinouts, and venture-backed start-ups, but a weaker record of helping those companies become global leaders while staying rooted in Britain.
Cambridge chip designer Arm remains the clearest example. The company chose New York rather than London for its listing and is now valued at around $370bn. Ministers regard that outcome as evidence of a deeper weakness in UK capital markets, where promising companies often reach a point at which the domestic funding ecosystem cannot support their next stage of expansion.
London remains Europe’s leading technology hub by several measures. Dealroom data cited by City AM shows that start-ups in the capital raised $17.7bn last year, while artificial intelligence investment almost doubled to $7bn as companies including OpenAI and Anthropic expanded their UK presence.
Kyle said government backing should come with a more active relationship. “This government isn’t going to sit aside from the businesses we are backing,” he said.
Recent examples include a £25m investment into Kraken, the technology arm of Octopus Energy, and a further £25m commitment through the British Business Bank into autonomous driving company Wayve. Those deals suggest ministers want public finance institutions to behave less like passive support schemes and more like long-term industrial partners.
The approach fits into a wider growth agenda, but it also raises questions over risk, governance, and selection. Greater state participation can help companies unlock private capital, especially in deep technology, clean energy, AI, life sciences, and other sectors where development cycles are long. It can also expose taxpayers to losses where commercial bets fail.
That tension is visible across the government’s investment architecture. The National Wealth Fund and British Business Bank have both been given larger roles in supporting industrial strategy, although parliamentary scrutiny has warned that their scale remains modest compared with international equivalents. Germany’s KfW, the US Small Business Administration, and major sovereign funds operate with balance sheets and mandates that give them far greater influence over national investment flows.
Larger state stakes will not solve the scale-up problem on their own. Capital availability is one constraint, but so are procurement, domestic customer demand, stock market liquidity, pension fund allocation, tax stability, skills, infrastructure, and the regulatory burden that comes with moving from start-up to mid-sized employer.
If public money helps companies reach the next funding round without changing the commercial environment around them, those companies may still choose overseas listings, overseas customers, or overseas ownership. Paired with procurement reform, pension capital, university commercialisation, and regional investment, a more active state model could help retain more economic value in the UK.
Geopolitics is also changing the way governments think about technology investment. Artificial intelligence, semiconductors, quantum computing, defence technology, clean energy systems, and cyber infrastructure are increasingly treated as strategic capabilities rather than purely private market outcomes.
A more active investment model will need clear rules. Companies will want to know whether public equity comes with procurement support, voting rights, conditions on location, restrictions on future sale, or expectations around listing. Private investors will also want clarity on whether government participation accelerates funding rounds or complicates them.
The strongest version of the policy would make the state a catalyst rather than a substitute for private capital, using public stakes to de-risk early markets, crowd in institutional money, and keep strategically important companies connected to UK supply chains and talent pools.
The weaker version would revive criticism that ministers are trying to pick winners without the market information or execution discipline required. The difference will depend on transparency, sector focus, governance, and whether investment decisions are paired with commercial routes to scale.
Kyle’s comments point to a broader test of industrial strategy. Britain’s technology base is not short of ideas, research, or start-up formation. The harder task is turning that pipeline into enduring domestic companies with the capital, customers, and market depth to compete globally.
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