NTUF Writes UK House of Commons on Quantum Tech Policy

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As the UK seeks to position itself as a science superpower, it must develop its leadership in quantum and other emerging technologies. To that end, Government needs to adopt an innovation-first approach that allows the private sector, academic institutions, and research organisations to spearhead innovation in the quantum technologies sector. To that end, the policy goals and strategies outlined in the National Quantum Strategy and the Science and Technology Framework are a step in the right direction. As quantum technologies develop further, such policies will need to be calibrated to reflect the changing technology landscape and the effectiveness of different policy tools. In the long run, Parliament will also need to develop a regulatory framework for quantum technologies, especially as they become more widespread. 

 

Due to the potential applications of quantum technologies in a broad range of sectors, Parliament should refrain from developing a one-size-fits-all approach to quantum governance. The three main types of quantum technologies— quantum sensing, communications, and computing—can be applied to widely different contexts, from the manufacturing of new materials to spatial exploration and numerical optimisation. As such, quantum rules should first and foremost depend on the sector and the specific context in which such technologies are applied. Furthermore, different quantum technologies are also at widely varying levels of potential commercialisation. For example, whereas quantum sensing technologies are already used for image recognition, the less advanced state of quantum computing means that the commercialisation of such technologies are at least several years away. 

 

 

 

 

However, such programmes will need to be better calibrated to attract the best and brightest quantum minds and entrepreneurs to work and start businesses in the UK. For example, as of November 2022, the universities whose recent graduates are eligible for the HPI visa included only five universities from the continent (two universities from Switzerland and one university each from France, Germany, and Sweden). While this list reflects the world’s overall best universities according to mainstream rankings, it excludes European universities with special strengths in quantum technologies—such as Germany’s Karlsruhe Institute and Heidelberg Universität and France’s École Normale Supérieure and École Polytechnique. Customising policy tools like the HPI visa could make it easier for UK companies to recruit recent graduates and professionals with quantum skills. Likewise, strengthening quantum-related research programmes and partnerships with the European Union, the US, Canada, and other like-minded nations would help attract quantum talent from other countries and promote innovation.

 

 

Access to financing remains a major challenge for the commercialisation of quantum technologies. Although the UK tech ecosystem has been successful in producing a relatively large number of innovative start-ups, it has been less successful in producing larger technology firms like in the US and China. A major reason behind the more successful performance of US and Chinese tech ecosystems, apart from the size of the large domestic markets, is the availability of financing options that enables start-ups and mid-size technology companies to scale up. In contrast, there is not only less funding available in the UK, but British investors are often also more reluctant to invest in innovative, riskier technology ventures. That is why Government should take steps to create a more thriving venture capital and private equity ecosystem. To that end, the recent liberalisation of the London Stock Exchange listing rules is a welcome development, but much else needs to be done to encourage UK-based initial public offerings of technology companies. A broader strategy to liberalise the UK’s venture capital and public equity markets will be necessary to sustain continued growth of the quantum technologies sector. Furthermore, Government should also consider lowering the corporation tax rate and introducing fiscal reforms to create a more dynamic technology financing ecosystem. 

 

 

As part of the National Quantum Strategy, the Government plans to invest £2.5 billion in quantum research and development in the next ten years. Greater transparency and more granular tracking of R&D expenditures and its impact on innovation within different quantum subdisciplines can enable the Government to take more evidence-based R&D decisions. To that end, Government should consider implementing measures to track and evaluate the innovation impact of research spending in different quantum sub-disciplines. For example, are investments in specific quantum disciplines—such as quantum sensing and communications—associated with better research outcomes than certain others? Are certain projects and research institutions more effective in spending R&D grants than others within the same subdiscipline? It should be borne in mind that certain areas of quantum technologies, such as quantum encryption and communication, are less mature than others, meaning that R&D benefits in such areas might take longer to become evident. Nevertheless, tracking research spending can help policy makers compare the effectiveness of research spending within the same quantum subdisciplines, and if used with caution, across different subdisciplines. Such data can enable policy makers to allocate limited taxpayer resources more effectively and stimulate competition among different components of R&D programmes. 

 

 

 

The Financial Conduct Authority was the world’s first regulator to create a financial technology (FinTech) sandbox, which was then adopted by more than 50 jurisdictions, including Canada, Singapore, South Korea, and the US. While we are unaware of sandboxes specifically geared towards quantum innovation, several jurisdictions have created sandbox programmes to promote innovation in sectors beyond FinTech. For instance, jurisdictions such as Utah in the US and British Columbia and Ontario in Canada have launched sandbox programmes to promote legal innovation. Likewise, in April 2023, a bipartisan bill introduced in the US House of Representatives proposed the creation of a quantum sandbox. Meanwhile, the European Union has proposed the creation of national AI sandboxes in individual EU member states (Spain launched the first one in 2021). In the UK, Government has expressed interest in creating an AI sandbox, while Ofcom has proposed the creation of “spectrum sandboxes” to understand the evolving needs of spectrum users and calibrate its authorisation approach accordingly. 

 

 

 

In addition to UK-wide sandbox programmes, reciprocal sandbox arrangements can help promote innovation and British leadership in global quantum governance. Since quantum regulations and norms are not yet well defined, Government has correctly identified potential for the UK to become a global leader in establishing international quantum technology standards. To that end, policy makers must think creatively about ways to pursue closer engagement with like-minded nations, shape international quantum standards and rules, and promote innovation. For example, in the context of UK-US technology cooperation, a joint reciprocal sandbox could allow UK companies to offer innovative quantum-enabled products in US markets and vice versa, promoting innovation on both sides of the Atlantic. Likewise, a better understanding of quantum-enabled business models could help transatlantic policy makers develop innovation-friendly regulatory frameworks.

 

Given that many quantum technologies are at early stages of development, the United States have not finalised any sandbox arrangements for quantum technologies. However, as previously discussed, a growing number of US states—such as Arizona, Hawaii, and Utah—have created sandboxes to promote innovation in financial and legal services. State-level sandboxes are a promising area where the UK could pursue closer economic cooperation with the US, since most state sandbox statutes typically allow US state governments to sign reciprocal agreements with foreign jurisdictions. Depending on the role that individual US states play in quantum innovation, Government should explore the creation of quantum UK-US sandbox programmes both at the state and federal levels. Likewise, reciprocal sandbox programmes with the EU, France, Germany, Australia, and Japan could also help the UK play a leadership role in the internationalisation of quantum technologies and global quantum governance.

 

 

Given the dual-use nature of most quantum technologies, Government rightly wants to ensure that quantum investments do not contravene UK national security interests. However, any foreign investment review rules must be proportionate and should not unduly burden the quantum technologies sector and impede innovation. To that end, Parliament should consider reforming the National Security and Investment (NSI) Act 2021, which provides the statutory framework to review and block foreign investment in 17 sectors, including quantum technologies. The NSI Act is overly broad in scope, meaning that quantum technologies with little national security implications could come under regulatory crosshairs. Furthermore, the legislation has extraterritorial effect and uses the overly broad personal jurisdiction definition of whether a company “carries on activities” or supplies “goods or services to persons in the United Kingdom”. As a result, even internal restructuring or merger between two companies with limited presence in the UK could be subject to the law. Unlike similar laws in comparable jurisdictions, the NSI Act also applies retroactively, meaning that investments completed up to five years ago could be brought under review.