New research identifies key pillars to support UK start-ups and scale-ups to thrive and grow: three ecosystem-building factors (markets, talent, knowledge clusters and network); funding opportunities; and alternative exit strategies.
The UK’s recent Modern Industrial Strategy white paper outlines a 10-year plan for economic growth by enhancing supply-side strengths and the business environment in eight growth-driving sectors
A new policy brief published by the Bennett School of Public Policy argues that enabling start-ups to grow are crucial to fulfilling this ambition—contributing in three ways: innovation, job creation, and market competition.
The research suggests that encouraging the start-up and scale-up landscape in the UK needs to be thought of in terms of developing and strengthening ecosystems, centred around different specialisms and knowledge bases. There also needs to be a broad view about distinctive financing needs, market structures and opportunities, talent pools, specialised support services and so on.
This implies not just a need to focus on specific policies but also the need for greater policy coordination than has characterised the UK in the past.
Authors, Professor Diane Coyle and Nghi Nguyen, examine the strengths and weaknesses of the UK’s start-up ecosystem and call for greater policy coordination to unlock the full potential of UK innovation.
The brief finds:
- Market scale and access remain a barrier: The UK’s relatively small domestic market, compounded by stagnant real wage growth, high cost of living and Brexit-related trade friction, limits early growth opportunities.
- Funding in the UK is strong but volatile: While venture capital funding is proportionally on par with the US, it relies heavily on overseas sources and is vulnerable to external shocks.
- Acquisitions dominate exit strategies: Nearly 90% of UK Venture Capital-backed exits in 2024 were via acquisitions, raising doubts about long-term innovation and markets in the UK.
“To truly empower UK start-ups and scale-ups, we need to think beyond isolated funding initiatives. Strong start-up ecosystems depend on well-connected knowledge clusters, access to risk-tolerant capital, and policies that reduce the friction of growth and restructuring. Coordinated, long-term policy—rooted in the Industrial Strategy—is essential to unlocking the full economic potential of these ecosystems,” says Professor Diane Coyle, Bennett Professor of Public Policy and Research Director at the Bennett School of Public Policy, Cambridge.
“Despite attracting hundreds of thousands of international students and producing a large graduate population, UK start-ups still struggle to recruit the talent they need. This might suggest a systemic disconnect between the UK’s skilled labour supply and what start-ups can actually access,’’ says Nghi Nguyen, Research Assistant at the Bennett School of Public Policy.
To deliver on the ambitions of the Industrial Strategy, the UK government must create the conditions for start-ups and scale-ups to thrive. This means tackling structural barriers around talent, funding, and market access—and investing in the ecosystems that power innovation. A coordinated, long-term policy approach is essential for driving sustainable economic growth across the UK.
Read the policy brief: Start-ups and scale-ups in UK technology sectors
The views and opinions expressed in this post are those of the author(s) and not necessarily those of the Bennett Institute for Public Policy.
