This update focuses on how growing quantum sector investment in the UK and US is leading to the development and commercialization of quantum computing technologies with the potential to revolutionize and disrupt key sectors.  This is a fast-growing area that is seeing significant levels of public and private investment activity.  We take a look at how approaches differ in the UK and US, and discuss how a concerted, international effort is needed both to realize the full potential of quantum technologies and to mitigate new risks that may arise as the technology matures.

Quantum Computing

Quantum computing uses quantum mechanics principles to solve certain complex mathematical problems faster than classical computers.  Whilst classical computers use binary “bits” to perform calculations, quantum computers use quantum bits (“qubits”).  The value of a bit can only be zero or one, whereas a qubit can exist as zero, one, or a combination of both states (a phenomenon known as superposition) allowing quantum computers to solve certain problems exponentially faster than classical computers. 

The applications of quantum technologies are wide-ranging and quantum computing has the potential to revolutionize many sectors, including life-sciences, climate and weather modelling, financial portfolio management and artificial intelligence (“AI”).  However, advances in quantum computing may also lead to some risks, the most significant being to data protection.  Hackers could exploit the ability of quantum computing to solve complex mathematical problems at high speeds to break currently used cryptography methods and access personal and sensitive data. 

This is a rapidly developing area that governments are only just turning their attention to.  Governments are focusing not just on “quantum-readiness” and countering the emerging threats that quantum computing will present in the hands of bad actors (the US, for instance, is planning the migration of sensitive data to post-quantum encryption), but also on ramping up investment and growth in quantum technologies. 

Developments in the UK

On 26 July 2024 the Department for Science, Innovation and Technology (“DSIT”) announced £106 million of government funding for five quantum research hubs.  The hubs will be based across the UK, in Birmingham, Edinburgh, Glasgow, London and Oxford, and will bring together academia and industry to develop a range of real-world, practical applications across a variety of sectors.  Specifically, the hubs will focus on developing revolutionary quantum technologies that have the potential to directly impact the healthcare, security and clean energy sectors.  These include the development of quantum sensors for ultra-sensitive disease diagnosis and treatment; the development of a UK-wide, secure “quantum internet”; and the development of quantum-based position and navigation systems in national security and critical national infrastructure.

Furthermore, on 5 February, 2024, the UK Government announced investment totaling £45 million as part of a push to transform the UK into a “quantum-enabled economy” by 2033.  £30 million is to be awarded to winners of the UK Research Institute (“UKRI”) Quantum Testbed Competition and will provide companies with the opportunity to move away from theoretical research and develop practical, real-world quantum technologies by providing prototype hardware for initial testing and evaluation.

The remaining £15 million is ringfenced for winners of the “Quantum Catalyst Fund.”  The Quantum Catalyst fund is designed to accelerate quantum solutions across the public sector and areas of key interest including transport (the use of quantum technologies to improve underground surveys and improve infrastructure project delivery), space, health, crime (the detection of anomalies in cargo and parcels), defense, and net zero.

The increasing level of investment by the UK Government shows an eagerness to embrace and harness the transformative power of quantum computing technology.  In turn, by developing quantum technologies that can be sold and exported, the UK Government can look to increase GDP whilst simultaneously improving domestic infrastructure.

Developments in the US

The US Government has invested in quantum technology significantly since 2020, having allocated $672 million in 2020, $855 million in 2021, $1.031 billion in 2022, and $932 million in 2023 to quantum research and development.  Congress allocated $968 million to the National Quantum Initiative (“NQI”) this year to continue such research.  The funding covers quantum research activities at various governmental agencies, including the Department of Defense, NASA, the NSA, and the Department of Energy.  The funding also supports the creation and maintenance of 14 Quantum Information Science Centers under the Department of Energy, the Department of Defense, and the National Science Foundation.

Significantly, the bill originally authorizing the creation of the NQI, which constitutes a large portion of the US’s quantum research budget, is set to expire next year.  Late last year, the Committee on Space, Science and Technology of the House of Representatives voted unanimously to reauthorize the bill, and on 25 July, 2024, the bill was reported to the full membership of the House. One significant amendment to the proposed bill is language directing government agencies engaging in quantum research to consider the use of AI in quantum science, engineering, and technology, as well as whether quantum may be used to advance AI and other emerging technologies.  Assuming that the legislative process proceeds apace, the reauthorization bill will allow the US to remain at the forefront of investment in quantum research.

On 2 July 2024, the Department of Commerce’s Economic Development Administration announced $41 million in funding for Elevate Quantum (“Elevate”), a private-public consortium seeking to advance quantum research in the Mountain West. The grant automatically unlocked an additional $77 million in funding for Elevate from the state of Colorado, and $10 million from New Mexico, bringing the investment total up to $128 million.  The University of Colorado Boulder estimates that the Elevate award will drive more than $2 billion in private investment to the Mountain West, as well as create over 10,000 jobs in the quantum sector.

Additionally, on 1 July 2024, the US National Science Foundation (“NSF”) announced a $20 million award that will support the construction of a nanoscale fabrication facility to accelerate the development of quantum devices.

Despite the high levels of public investment in quantum, it is worth noting that there has been a sizable decline in venture capital investment in the field.  According to IQM’s State of Quantum 2024 Report, while private investment in quantum grew by 3% in Europe, the Middle East, and Africa, it declined by 80% in the US and 50% worldwide from 2022 to 2023. The decline represented a drop from about $2.2 billion to $1.2 billion in the same period.  The market’s reduced interest notwithstanding, it is clear that the US Government remains committed to advancing quantum technology domestically and in collaboration with its allies.

Collaboration Among the US and the UK

On 6 June 2024, the Cleveland Clinic announced new UK-US partnership in healthcare and life science applications for quantum technology on.  The partnership between the Science and Technology Facilities Council (“STFC”) Hartree Centre, the Cleveland Clinic and IBM will receive £210 million of funding over five years to be used on developing AI and quantum computing technologies that can be leveraged to improve healthcare globally.  This partnership further underpins the need for not only a global, concerted approach to the development and management of quantum technology, but also the need for collaboration between academia, industry and policy makers if the transformative potential of quantum computing is to be realized.

How the UK and US Stack Up

It remains to be seen how the field of quantum computing will develop, and how its potential impacts will be seen and felt.  Crucially, government policy, investment and regulation will likely play a big role in the growth of this technology in the UK, US and beyond.  Despite the investments outlined in this post, the US and the UK face stiff competition from their global competitors.  According to McKinsey, as of 2022, the total historic announced funding for quantum was $1.9 billion by the US, $7.2 billion by the European Union, and $15.3 billion by China — eight times more than the US.  Further collaborations with the US’s and UK’s international allies will be paramount to staying competitive in the quantum race.  Additionally, the US and the UK must pay close attention to developments abroad not just with a view towards remaining competitive, but also with regards to the risks that certain breakthroughs in quantum technology domestically and internationally may present to national security, banking, and secure communications.

Covington is monitoring developments globally in this fast-growing area.  See here for our recent blog post on EU strategy on quantum computing.  Please reach out to a member of the team with any

Tags: Investment, Quantum, Quantum Computing, technology, UK Government, US Government
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Photo of Nigel Howard Nigel Howard

For over 30 years Nigel Howard has specialized in technology transactions such as M&A, strategic alliances, licensing, distribution agreements and outsourcing. Clients range from start-ups and emerging companies to international corporations. He has led negotiations of billion dollar service agreements that were critical…

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