Quantum technologies Contents

5Continuing the National Programme—Funding

57.The second phase of the National Quantum Technologies Programme was allocated £315m in the 2018 Budget.156 The existing Hubs will receive £80m to continue their work, while £35m will be spent on a new national quantum computing centre and up to £70m will be awarded through the Industrial Strategy Challenge Fund.157 In addition to this funding for the National Quantum Technologies Programme, which focuses on developing quantum technologies for application, we heard from many witnesses of the importance of maintaining or expanding funding for the fundamental science research underpinning discoveries in quantum physics.158 Professor Sir Mark Walport, Chief Executive of UKRI, assured us that decisions over funding for fundamental research and technology development were not “either/or questions” and stated that “fundamental research needs to continue”.159 The Engineering and Physical Sciences Research Council, which is responsible for most fundamental quantum science research, currently intends to ‘maintain’ the level of funding for quantum technologies (rather than to ‘grow’ or ‘reduce’ it).160 However, Professor David Delpy, Chair of the National Programme’s Strategic Advisory Board, suggested that increased funding for such research would be needed from the research councils:

A consequence of £270m going into quantum technologies is that there is increased demand on the academic side for basic quantum science development. We need to ensure that that grows. The Engineering and Physical Sciences Research Council has been very clear that it wants to continue to commit to that, but that depends on its budget.161

The Institute of Physics recommended that the level of funding that research councils allocate to basic quantum science research “should continue to be reviewed periodically, in consultation with the research communities”, noting that “it may be that as new technological solutions and devices are developed, new avenues for basic research appear”.162

58.In addition to the importance of supporting fundamental and applied research, the balance between larger and smaller-scale projects was also raised during our inquiry. Some, such as Dr Andrew Shields, of Toshiba Research Europe Ltd, argued that technology development projects should be larger and have longer durations in the second phase of the National Programme.163 The UCL Quantum Science and Technology Institute added that longer timescales for commercial innovation could be incentivised through changes to the corporate tax system as well as through extending the duration of Government co-funded projects.164 Conversely, other witnesses warned that smaller projects would still be needed, in particular given the capacity of small to medium-sized enterprises that make up a significant proportion of the current UK quantum technologies industry.165

59.With bids for funding from the Industrial Strategy Challenge Fund subject to competitive review, Professor Walport explained that the extent to which industry was willing to invest alongside Government funding would be one important criterion in the decision-making process.166 This ties in with the Government Office for Science’s original recommendation to continue the National Programme with “matched private sector investment in any future phase, to increase the level of industry commitment to the programme, and to accelerate the process of commercialisation”.167 Professor Delpy told us that the National Programme’s Strategic Advisory Board anticipated that its £338m bid, if successful, would attract around £200m in matched funding from external partners.168 However, he warned that:

It is difficult to judge the actual commitment, because a lot of it is in kind and in the time of industrial collaborators. To be honest, it would be unfair, when we do not have an industry, to say that we need matching funding from the industry.169

QuantIC, the National Hub for quantum-enhanced imaging, similarly warned that “the development of new quantum technology is embryonic” and that “sustained government funding is required to maintain confidence”:

It is important that the next phase of the national programme seeks to leverage industrial funding, but in a way that takes into account the risks associated with early stage technology development and the immaturity of the supply chain. There is a real danger that premature cliff-edge withdrawal of public funding in the expectation that industry will fill the gap will result in a loss of competitiveness for the UK. Public funding should be tapered in recognition of the early stage risky nature of quantum technology.170

60.Professor Walport told us that he accepted Professor Delpy’s concerns about expecting matched funding from a currently non-existent industry “only up to a point”.171 He clarified that matched funding would not be expected for “fundamental research” and that he would expect the National Programme to support co-investment “at that interface between academia [and industry] where it really is too early”, but stated that:

Far-sighted, technologically-based industry does invest in its research and development. Look at the pharmaceutical industry—it does an enormous amount of R&D on its own account in order to get new drugs and vaccines to market.172

M Squared, however, described the difficulties companies faced in bringing technologies to market, and the consequent risks for private sector investment:

The reality is that whilst significant commercial opportunities can be realised over both near-term and longer-term timescales, the sector as a whole is characterised by significant technical and market risks. On the delivery side, there are highly complex systems requiring advanced engineering developments, whilst the target markets are invariably loosely-defined or are so disruptive that the route to market remains to be mapped out.173

61.The National Physical Laboratory has been tasked by UK Research and Innovation with engaging with industry to explore preferred mechanisms for funding.174 It suggested that other companies shared M Squared’s concerns—telling us that it had encountered a “reluctance of large industry to invest in early stage research projects, even if there is a large, long-term potential benefit”, with some companies saying they “would only invest in technologies that were a maximum of three years from market”.175 Several other witnesses not representing industry bodies, such as the Quantum Communications Hub and the Institute of Physics, also warned of the potential risks of asking more of industry than it was prepared to provide.176

62.Professor Sir Michael Pepper, representing the Royal Academy of Engineering, agreed that “the requirement for matched funding […] is a major disincentive” for industry when projects are expensive and have long-term returns. He told us that he thought Government funding should principally target “the buildings, depreciation and that sort of thing, to make it financially more attractive for companies to come in with a financial contribution”.177 The UCL Quantum Science and Technology Institute recommended focusing public money on “high-risk, high-gain” projects, with matched industry investment requirements for technologies that were nearer to market.178 Professor Tim Spiller, Director of the Quantum Communications Hub, added that matched funding requirements could be made less likely to deter industry investment if the rules were made more flexible. In particular, he suggested that Innovate UK should accept “in-kind contributions” instead of cash only.179

63.In addition to the broad funding strategy, we heard some concerns during our inquiry regarding specific funding rules. Projects awarded Innovate UK funding must satisfy certain requirements, including:

Innovate UK explains in its guidance that these rules are intended to provide “funding to support and stimulate innovation in the UK economy”, by “encouraging businesses to work with other commercial and research organisations”.181 However, Fraunhofer UK Research Ltd warned us that the 30% limit for non-commercial organisations prevented themselves and other research and technology organisations (RTOs182) from assisting some companies as fully as they could, because:

For many of the smaller companies, undertaking 70% of a project is a daunting prospect and they may lack the expertise, [employees], and matched funds, for example, to undertake £700,000 of activity from a £1m project. Fraunhofer CAP is repeatedly asked to do more than 50% of the work and projects are being artificially trimmed in their ambition to meet the rules.183

64.Fraunhofer UK Research Ltd further warned that “the 30% limit prohibits meaningful consortia of multiple RTOs or combinations of Higher Education Institutions and RTOs working together on projects”.184 It advocated relaxing the rule for quantum technology projects “to enable the rapid transition of technologies from university lab, through RTO development and national lab standards to the small or medium-sized enterprise”.185 Dr Peter Thompson, CEO of the National Physical Laboratory (another RTO), agreed that flexibility in application of this rule could be beneficial:

There could probably be a relaxation so that we identify absolutely what the right team is for the right programme and then look at the funding model. Sometimes it is the other way round; the right organisations cannot be part of the consortium because of the rules. We need some flexibility.186

M Squared additionally suggested that Innovate UK should review “the extent to which any one company can participate in the programme as to avoid limiting the overall investment that is made in a given funding round”.187

65.UKRI explained that the 30% limit for non-commercial organisations was in place to “encourage greater industry commitment and investment to these projects as the endeavours become more sustainable”.188 It added:

We continue to keep funding rules for programmes supporting the development of quantum technologies under consideration and modify these for the specific funding route if necessary. If an RTO (or any other organisation) has a compelling proposal but cannot identify a suitable competition to seek funding, we would encourage them to talk to us, through one of our councils, so we could explore an appropriate funding route.189

66.It is right that the Government should look to industry to contribute to funding for technology development, especially as quantum technologies grow closer to commercialisation. However, it is important that matched funding requirements do not prevent important work from going ahead. Other funding rules, such as the 30% limit on project funding awarded to non-commercial organisations, can also restrict the scope of some projects.

67.Innovate UK should ensure that there is flexibility in rules where State Aid rules and other relevant regulations allow it, and design the rules applying to funding calls around the aims of the project rather than designing projects around the standard rules. In particular, the 30% limit on funding that can be awarded to non-commercial organisations should be relaxed where it hampers applications for funding calls or the scope of the projects funded. UK Research and Innovation should monitor the impact of any matched funding requirements and ensure that such conditions do not detriment the development of quantum technologies in the UK. It should take into account ‘in-kind’ contributions (such as time, access to facilities or training) from industry rather than pure investment alone, and continually review the funding environment in the UK compared to other quantum technology programmes internationally, to ensure that the UK remains competitive. The Government should prioritise spending on initiatives or capital that will benefit the development of the wider UK quantum technologies industry alongside those projects that will encourage co-investment from industry.

68.UK Research and Innovation, in co-operation with the new Executive Board, should regularly review the funding available to fundamental research in quantum science. As the Government aims to increase spending on research and development to 2.4% of GDP, and as the National Quantum Technologies Programme develops the application and commercialisation of quantum technologies, the Government should be ready to provide the funding required to ensure fundamental research keeps pace. UK Research and Innovation should additionally ensure that projects of a variety of scale and duration are funded, to ensure that opportunities exist for organisations of all sizes.

Demonstrator projects and Government procurement

69.The Quantum Engineering Technology (QET) Labs, at the University of Bristol, told us that “the UK’s quantum industry is in its early stages and mainly consists of a small number of start-ups”,190 which tend to produce components for quantum-enabled products rather than the final products themselves.191 Professor Delpy explained that the next stage of a quantum industry would involve “systems integrators” (larger companies producing final products, such as an automotive manufacturer building new cars) incorporating quantum components into their products.192 Dr Graeme Malcolm, CEO of M Squared, similarly explained that a fully-developed industry would “need to have the basic components, the supply chains, the integrations and the end users all lining up together”.193 The Quantum Communications Hub, however, warned that demand from end-users was currently low:

Perhaps the biggest barrier remaining for the commercialisation and uptake of quantum communications technologies is the growth of markets and the stimulation of market pull. Disruptive technologies often start with ‘technology push’ and this now needs to change.194

The Ministry of Defence agreed that “the first priority [for the second phase of the National Programme] should be engaging industry and end-users to stimulate technology translation and early adoption”.195

70.Fraunhofer UK Research Ltd told us that it perceived “a realisation in industry that quantum technology is coming” and said that “there is now a glint in the eye of Tier 1 companies at the very mention of quantum technologies”.196 This was not, however, a common opinion.197 Professor Knight warned:

There is low industry awareness, and it worries me. When I am in North America and talk to CEOs and chairs of companies, they are fully aware of new technologies and their development. There is not quite that sense yet in some of the big companies here in the UK, so we need to do more work on it.198

Dr Peter Thompson, CEO of the National Physical Laboratory, told us that although large parts of industry did not yet recognise the potential of quantum technology, his experience of engaging with large companies indicated that attitudes could be changed “quite rapidly”.199 The National Physical Laboratory recommended that “in order to better engage large industry, near-market technology solutions need to be practically demonstrated, to provide industry with the confidence to invest in this area”.200 Support for such demonstrator projects was widespread among our witnesses.201 Dr Thompson emphasised that “proof of value, or the route to proof of value” must be demonstrated, “rather than proof of concept”.202

71.The Government Office for Science noted in its 2016 report on quantum technologies that the “Government is not subject to the same near-term commercial constraints as private sector organisations”, which “gives it a unique ability to act as a demonstration client”.203 The Institute of Physics told us, however, that—outside the defence sector—public bodies could be supporting more demonstrator projects.204 Professor Kai Bongs, Director of the National Quantum Hub for Sensors and Metrology, told us that his Hub had been involved in two demonstrator projects funded by the Defence Science and Technology Laboratory, and that these had “proven extremely efficient in deeply involving the industry”.205 He outlined the sort of demonstrator projects that he felt the Government should be looking to support:

We see benefits mainly in areas where there is large public interest but maybe more fragmented and smaller scale company infrastructure projects. For instance, the Department for Transport could look into sensors for drainage under rail tracks or sinkholes under roads, which are billion-level problems, but are quite hard to solve with conventional technologies; or you might think about [the Department for Environment, Food and Rural Affairs] investing in sensors to look for river embankments in flood areas.206

Indeed, we heard of a variety of potential demonstrator projects during the course of our inquiry, such as:

72.The Science Minister, Sam Gyimah MP, assured us that he was “looking at the opportunity for Government to play a role in [the development of quantum technologies] as a procurer of innovation”.212 However, pressed on what he was doing to encourage Government support for technology demonstration projects outside of the Ministry of Defence, the Minister told us that:

My Department […] does a lot of work with [the Department for Digital, Culture, Media and Sport]. We are currently going through a review of quantum computing and quantum technologies. We will report by the end of this year, and there will be recommendations for Ministers to follow […] As for other Departments, there is work going on, but it is not directly within my area of responsibility to drive the quantum technologies and how they could be exploited in the transport Department.213

Professor Sir Mark Walport, Chief Executive of UKRI, added that “the chief scientist network has an important role to play” in raising awareness of the potential of quantum technologies across Government.214

73.Awareness across industry of the potential for quantum technologies, in particular in the short-term, needs to be improved. The new Executive Board should engage with businesses and industry bodies that are not yet actively pursuing opportunities presented by quantum technologies, articulating the near-term capabilities expected of such technologies and investigating what specific product requirements and technology demonstrations are needed to drive uptake in different sectors. This activity should aim to raise industrial awareness of quantum technologies and feed into the Executive Board’s roadmap and strategy for developing the UK quantum technologies industry.

74.We commend the Ministry of Defence on its support for quantum technology demonstrator projects. Similar opportunities exist for other Government departments to support the development of quantum technology products that they would benefit from, with the added advantage of assisting the nascent UK quantum industry by demonstrating the value of quantum technologies to other potential end-users. In collaboration with the Chief Scientific Adviser network, the new Executive Board of the National Quantum Technologies Programme should identify opportunities for Government Departments to support quantum technology demonstrator projects and encourage their uptake by assessing the positive impacts that such projects could achieve for the Department and for the UK quantum technologies industry, if successful.

The Small Business Research Initiative

75.The opportunity for Government departments to support the commercialisation of new technologies is the focus of the Small Business Research Initiative (SBRI),215 which aims to “help [innovators] demonstrate and develop their new technologies” as well as “[helping] government organisations solve tough challenges by connecting them with innovative businesses”.216 The SBRI provides support to public bodies, through Innovate UK, to run competitions inviting businesses to bid for contracts to develop innovative solutions to specific challenges faced by the public sector body.217 The initiative was re-launched in 2008 but was not allocated any defined funding.218 An independent, Government-commissioned review of SBRI (the ‘Connell Review’) concluded in 2017 that “the public sector is still not taking full advantage of SBRI’s potential”.219 It noted that SBRI spending targets were missed before being abandoned, and that spending fell by 24% from 2014–15 to 2015–16, the last year for which records are available.220 The review made several recommendations on how to make better use of the opportunity presented by SBRI, including:

76.We wrote to the Chancellor of the Exchequer in April 2018, seeking clarification on how the Government intended to act upon the recommendations of the Connell Review.222 In response, the Secretary of State for Business, Energy and Industrial Strategy informed us that the Government was “taking on board recommendations for a central fund and the need for departments to build SBRI capability”, but set out no new measures that it would take beyond what had been set out in the Industrial Strategy White Paper.223 The White Paper, however, was published prior to the publication of the Connell review and so did not respond to its recommendations.224 Instead, it announced the Government’s intention to “refocus the SBRI to increase its impact for innovative businesses”, aligning it with the Government’s Grand Challenges, and to establish a GovTech Catalyst as “a first step” towards “building capability in the public sector to drive productivity by adopting SBRI solutions”.225 The GovTech Catalyst was created to “help public bodies to identify challenges that could be solved with new digital technologies and build capability to run SBRI competitions”.226 It has been allocated £20m to support 15 challenges over three years.227

77.Despite the lack of any clear proposed action to promote the use of SBRI to support the development of a UK quantum technologies industry, the Science Minister told us that the Government was “looking at how [it] could use [the SBRI] more actively”.228

78.We agree with the Connell Review that the Small Business Research Initiative has a “unique and valuable role to play in the innovation and procurement landscape”, supporting UK businesses in developing innovative new products while enabling public sector bodies to source innovative solutions to the challenges they face. However, the Government’s response to the Connell Review so far appears limited. The GovTech Catalyst only supports public bodies in sourcing digital technology solutions and the three-year, £20m GovTech Fund is significantly smaller than the £250m that the Connell Review recommended to be spent per annum through SBRI, or the £200m target the Government had for SBRI spending in 2014–15. We recommend that the Government fully adopts the recommendations of the Connell Review, and establishes a central SBRI fund with a National Board to oversee its delivery as part of the 2019 Spending Review.

79.Quantum technologies promise significant opportunities for UK economic growth as well as improvements to Government departments’ capabilities. Quantum technologies are therefore particularly well-suited to the aims and implementation of the Small Business Research Initiative. We recommend that the Government establishes a QuantumTech Catalyst to drive public sector organisations’ use of the Small Business Research Initiative for quantum technologies, in the same way that the GovTech Catalyst has for digital technologies. The new QuantumTech Catalyst should seek to launch a first round of challenges within six months of this Report’s publication.


156 HM Treasury, ‘Budget 2018’ (2018), para 4.20

157 HM Treasury, ‘Budget 2018’ (2018), para 4.20

158 For example, see: UCL Quantum Science and Technology Institute (QUT0008), paras 3 and 38; Institute of Physics (QUT0010), para 6; National Physical Laboratory (QUT0017), para 38; Dr Andrew Shields (QUT0020); QET Labs, University of Bristol (QUT0019), para 26; Qq68, 83 and 168

160Research areas: Quantum technologies theme’, Engineering and Physical Sciences Research Council, accessed 9 November 2018

162 Institute of Physics (QUT0010), para 6

163 Dr Andrew Shields (QUT0020); see also: UCL Quantum Science and Technology Institute (QUT0008), para 20; Royal Academy of Engineering (QUT0012)

164 UCL Quantum Science and Technology Institute (QUT0008), para 15

165 Qq167 and 205

166 Qq360 and 373

167 Government Office for Science, ‘The Quantum Age: technological opportunities’ (2016), p10

170 QuantIC (QUT0002), para 9

173 M Squared (QUT0024)

174 National Physical Laboratory (QUT0017), para 11

175 National Physical Laboratory (QUT0017), para 41

176 For example, see: University of Sussex (QUT0007), para 7.2; Quantum Communications Hub (QUT0009); Institute of Physics (QUT0010), paras 7–8; Quantum Technology Hub for Sensors and Metrology (QUT0013); Qq165–166

178 UCL Quantum Science and Technology Institute (QUT0008), Executive Summary; see also: Q92

180General guidance for grant applicants: Participation in a project’, Innovate UK, accessed 9 November 2018

181General guidance for grant applicants: Participation in a project’, Innovate UK, accessed 9 November 2018

182 Innovate UK defines research and technology organisations (RTOs) as non-profit entity “whose primary goal is to independently conduct fundamental research, industrial research or experimental development or to widely disseminate the results of such activities by way of teaching, publication or knowledge transfer”—’ General guidance for grant applicants: Research organisations’, Innovate UK, accessed 9 November 2018

183 Fraunhofer UK Research Ltd (QUT0021)

184 Fraunhofer UK Research Ltd (QUT0021)

185 Fraunhofer UK Research Ltd (QUT0021)

187 M Squared (QUT0024)

188 UK Research and Innovation (QUT0031)

189 UK Research and Innovation (QUT0031)

190 QET Labs, University of Bristol (QUT0019)

191 See also: QuantIC, University of Glasgow (QUT0002), para 12; Q15

192 Qq5, 15 and 22–23

194 Quantum Communications Hub (QUT0009)

195 Ministry of Defence (QUT0026), para 22

196 Fraunhofer UK Research Ltd (QUT0021)

197 For example, see: University of Strathclyde (QUT0004); Institute of Physics (QUT0010), para 11; PA Consulting Group (QUT0014), para 3; Qq302 and 368

200 National Physical Laboratory (QUT0017), para 41

201 For example, see: Quantum Technology Hub for Sensors and Metrology (QUT0013); Institute of Physics (QUT0010), para 9; PA Consulting Group (QUT0014), para 14; National Physical Laboratory (QUT0017), paras 41 and 48; EU COST action QTSpace (QUT0018); Qq142, 231, 279 and 297

203 Government Office for Science, ‘The Quantum Age: technological opportunities’ (2016), p48

204 Institute of Physics (QUT0010), para 9

207 For example: Teledyne e2v (QUT0016); National Physical Laboratory (QUT0017), para 54; Qq297–299; National Physical Laboratory (QUT0028); see also: Government Office for Science, ‘Satellite-derived Time and Position: A Study of Critical Dependencies’ (2018), p69

208 Institute of Physics (QUT0010), para 9 and Q300

210 EU COST action QTSpace (QUT0018); Q300

211 Airbus (QUT0001); Manchester Metropolitan University (QUT0003), para 13; Qq82 and 300

215SBRI: the Small Business Research Initiative’, UK Research and Innovation, accessed 6 November 2018

216 Innovate UK, ‘SBRI’ (2017)

219 David Connell, ‘Leveraging Public Procurement to Grow the Innovation Economy: An Independent Review of the Small Business Research Initiative’ (2017), p7; The Government acknowledged to our predecessor Committee that SBRI had “yet to reach its full potential”—House of Commons Science and Technology Committee, Second Special Report of Session 2017–19, ‘Managing intellectual property and technology transfer: Government Response’, HC 318, p3

222 Letter from Rt Hon Norman Lamb MP, Rt Hon Nicky Morgan MP and Rachel Reeves MP to Rt Hon Philip Hammond MP, 24 April 2018

223 Letter from Rt Hon Greg Clark MP to Rt Hon Norman Lamb MP, Rt Hon Nicky Morgan MP and Rachel Reeves MP, 15 May 2018

225 HM Government, ‘Industrial Strategy: Building a Britain fit for the future’, p70; The Grand Challenges are intended to improve UK lives and productivity by addressing major global changes, currently comprising ‘artificial intelligence and data’, ‘ageing society’, ‘clean growth’ and ‘future of mobility’—HM Government, ‘Industrial Strategy: Building a Britain fit for the future’, pp30–55

226 Letter from Rt Hon Greg Clark MP to Rt Hon Norman Lamb MP, Rt Hon Nicky Morgan MP and Rachel Reeves MP, 15 May 2018

227GovTech Catalyst information’, Government Digital Service, accessed 6 November 2018




Published: 6 December 2018