Public Funds at Risk from Dispersed UK Tech Investment

A leading investor in northern England’s technology sector has sharply criticised government policy on technology funding, claiming that spreading resources across regions with little chance of global competitiveness is wasteful. Duncan Johnson, chief executive of Northern Gritstone, which supports life science and deep technology spinouts from universities in Liverpool, Manchester, Leeds, and Sheffield, as well as early-stage firms in these cities, has urged ministers to direct funding towards existing high-potential hubs instead of diluting the impact nationally.

The government recently allocated five million pounds each for new artificial intelligence growth zones in north and south Wales. This follows earlier growth zone announcements for Bristol and London. The investment aims to stimulate start-ups developing AI products by providing crucial early capital. Liz Kendall, Secretary for Science, Innovation and Technology, stated that this funding was designed to regenerate communities, create jobs, and deliver new opportunities in regions that need them most.

Johnson, however, described the move as a misallocation of finite public resources, arguing that the fastest-growing AI hubs in the UK are situated in Manchester and Leeds rather than Cardiff or Rhyl. He contends that expanding existing centres of excellence rather than supporting regions without established foundations for tech growth is the most effective way to enhance the UK’s global tech position.

He criticised the government’s practice of conflating social welfare and technology policy, noting that such an approach may impede the country’s ability to build a competitive and innovative economy. Johnson calls for a concentrated strategy, focusing government attention and resources on the so-called ‘technology diamond’ encompassing Oxford, Cambridge, London, and the Northern Arc, which stretches from Liverpool to Sheffield. He claims the north’s share of UK technology funding has risen from two percent in 2019 to eight percent last year as a direct result of this targeted approach.

Despite suggestions that regions like south Wales, known for semiconductors, could benefit from increased investment, Johnson argues that these areas lack the necessary critical mass and gravitational pull. He warns that dividing funds across too many regions leads to subcritical investments, failing to deliver the scale required for meaningful impact. Johnson also points to undercapitalisation as a broader issue, with government allocations to proof-of-concept schemes covering only an individual major research institution’s annual needs, let alone generating national impact.

The government has defended its approach, insisting that unlocking opportunity nationwide remains a priority, and that backing talent across the entire country will build a stronger, more resilient economy. Data from Beauhurst and Dealroom suggest that while targeted investment yields higher regional growth rates and attracts international attention, companies backed by US investors see much faster revenue growth compared with those supported only by domestic funds. Johnson argues that greater ambition and a more focused, large-scale investment strategy are needed if the UK’s technology sector is to compete with leading global innovation hubs.