Business and Trade Committee
Oral evidence: Export led growth, HC 649
Tuesday 3 June 2025
Ordered by the House of Commons to be published on 3 June 2025.
Members present: Liam Byrne (Chair); Antonia Bance; John Cooper; Sarah Edwards; Alison Griffiths; Charlie Maynard; Gregor Poynton; Mr Joshua Reynolds; Matt Western.
Science, Innovation and Technology Committee member also present: Chi Onwurah.
Questions 300 - 320
Witnesses
III: Dr Simon Thomas, Chief Executive Officer, Paragraf; Sabina Ciofu, Associate Director – International, techUK; and Jonathan Legh-Smith MBE, Executive Director, UKQuantum.
Examination of Witnesses
Witnesses: Dr Simon Thomas, Sabina Ciofu and Jonathan Legh-Smith.
Chair: Welcome to this third panel in today’s hearing exploring the US‑UK trade deal. Thank you very much indeed to our witnesses for their patience and forbearance. The Chair of the Science, Innovation and Technology Committee is going to open the bowling.
Q300 Chi Onwurah: Thank you very much, Chair. It is a great pleasure to be here guesting on this Committee. It is of great interest to consider the technology trade opportunities. As we all know, the US is the world’s leading tech economy. The UK, according to most statistics, is the world’s No. 3, so these are really important services and products to both our economies. We have a number of agreements between the US and the UK regarding technology co-operation and exchange, et cetera.
I will start with Sabina Ciofu. Could you introduce your organisation and say what a digital trade agreement could deliver that the sector cannot access today?
Sabina Ciofu: Thank you for having me. It is great to see a lot of familiar faces again. I am Sabina. I represent techUK, which has about 1,200 members in the tech space, in the broadest possible definition of the tech sector, from chips to clicks. We have been long‑term supporters of a UK-US digital trade agreement. Ideally, we will have a full trade agreement, but we all know the challenges with that one.
On digital trade, unlike some other areas, there is wide agreement among stakeholders on both sides of the Atlantic that a UK-US digital trade agreement makes sense for the economy. In terms of what it brings, there is a macro-level conversation here. A UK-US digital trade agreement will send a strong signal of resilience against digital protectionism, which has been on the rise around the world, and the fragmentation of the global digital economy.
It will also enable the various forms of co-operation on critical supply chains that, again, have been prone to geopolitical fragmentation and tensions. It will allow us to work more closely together on standards, which, again, is a very important area, given all the areas of emerging technologies that we have been covering.
Lastly, in this group of macro elements, there is also a political and commercial signal that digital trade is important. If it comes from the No. 1 and No. 3 digital economies of the world that this is how we do digital trade and these are the rules of the game, it is a very strong signal for the rest of the world.
In terms of more targeted areas, we can look at closer co-operation on AI and quantum. AI—definitely not quantum—has, to some extent, been explored in digital trade agreements so far, so we can build on our precedent with the US, given that we are two strong players in the quantum industry and the AI industry.
It can bring certainty around data flows. We have a UK-US data bridge, but that is very much reliant on the EU-US one. We do not know for how long this will survive the courts, so certainty around data flow is very important.
It will provide some certainty around procurement and the broader area of regulatory co-operation. One of the areas that my members always complain about when it comes to trade is very rarely anything to do with tariffs or the broader conversation there, but very much to do with the rules and regulations behind the border and assisting companies with compliance.
One last point that I will make is about providing a platform for tackling supply chain vulnerabilities together, if you think of climate shocks or the more recent stories around the security threats to undersea cables. There are a number of areas where we can build on a very strong partnership by putting in place a digital trade agreement.
Dr Thomas: I am Simon Thomas. I am the CEO of a company called Paragraf. We are creating the next generation of microchips out of a material called graphene, which has been around for a while. It was invented in Manchester, so it is a UK invention.
I completely agree with everything that Sabina has just said, but, if I take it from the hardware perspective and how the digital interface is now coming across hardware manufacturing, I can give a slightly different angle to this.
I am quite worried about the future of digital trade, because a lot of what we do now is partnerships between companies to make devices or technologies. Part of that process is the exchange of information. It is no longer possible to create something in one location. You have to use partners around the world.
In the newspapers, we often think of digital trade as things like Meta and Google, and stuff like that, but digital trade is now a whole backbone of industry. For example, if I want to get a chip made that is going to be put into a system, I might get part of it done in a company in, let us say, Taiwan. I might get part of it done in a company in the US. To do that, I have to send designs, knowledge and IP.
For me, what is really important about any new trade deal is, exactly as Sabina just said, protection. The more we go down the road of machine learning, AI and quantum, the more we have to share information and data. Some of it is becoming extremely critical. The backbone of Paragraf is the core IP of how we make the material. As that gets passed around from factory to factory, it becomes more and more at risk. What we could start to target in a new trade deal is how we look at protecting that data.
Q301 Chi Onwurah: Is that not protected through IP agreements or standards that are already recognised between the US and the UK?
Dr Thomas: IP is a very complex landscape, whether it is patents, know-how or trade secrets. Some of those things—particularly the trade secrets—are extremely important. Yes, they are protected through agreements, but they are not protected from being intercepted on your partner’s server. They are not protected by any generalised rules or regulations that say, “If that server is not up to a certain standard, you cannot send it there.”
We are going to have to try to get towards that landscape for companies to be trusted. As we see more and more data breaches happen—we have all seen them in the news—investors become more and more risk-averse, and companies such as Paragraf, which are at the starting end of the spectrum and do not really have all of the big infrastructure around them to be able to grow in that digital environment, become more and more risky for that investment.
Having standards and regulations, as Sabina has just brought up, is absolutely critical, particularly if you want to have what I would call protected data flow around the world.
Jonathan Legh-Smith: I am Jonathan Legh-Smith. I am the executive director of UKQuantum. We are the association for the UK’s quantum technologies industry. When I say quantum technologies, I include, of course, quantum computing, but also quantum sensing technologies for utilities, underground monitoring, healthcare and the like, quantum clocks, and quantum secure communications. We represent the entire part of that industry.
We have had a statement of intent between the UK and the US for a few years now. I think it was 2021 when we signed that. It really recognises that this is a nascent industry, and the global industry recognises that collaboration is essential for the commercialisation of the technologies and for developing the markets, as well as, we should say, for national security issues. This is one of those topics where opportunities and threats both exist, and collaboration is the best route to ensuring that we are on top on that.
We have not yet seen what the impact of the trade agreement might be, but I would hope that it is an opportunity to crystallise that statement of intent. We already see collaboration in terms of academic and national institutions and UK companies doing business and partnering in the US, and, likewise, US companies coming into the UK.
Q302 Chair: Jonathan, what tangible do you want in a UK-US trade agreement on tech?
Jonathan Legh-Smith: The thing there is, although there is engagement, to start to take out those obstacles that exist. Within quantum, we have export controls that have been introduced unilaterally by many countries. We have exemptions for allied nations, such as the US, but it is still an obstacle. We have procurement policies whereby one nation would favour technology from its own nation over others. Industry wants to collaborate, but it has to work around, “I know that you are from the UK. Perhaps you could run it through a US subsidiary or something in order to make that work.” It is about removing those sorts of barriers.
Tariffs have not really come up. We are not sure what the implications are, but they, of course, represent a barrier to the collaboration that the industry needs. It is about dealing with those sorts of obstacles.
Q303 Alison Griffiths: Simon has already laid out some of the real issues around cyber-security and the wider data protection issues that we need to address. Are there issues that you have seen in previous deals that we need to make sure we are covering here? What I heard in your original answer was fantastic and incredibly aspirational, but we all know that creating secure data protection in the exact environments that Simon laid out so articulately will require much more detail. Could you please go into some of the detail of what exactly we are going to need to see in this deal to provide that confidence?
Sabina Ciofu: We have a very good precedent in the UK right now in terms of what we have put in our digital trade agreements. Even a few years back, digital trade agreements were something that other people were doing. It was not a European thing yet. It was very much an Asia‑Pacific focus.
In the meantime, the UK has built its precedent in digital trade agreements, and in very good FTAs with digital trade chapters. Those are mostly with Asia-Pacific countries. We have a very good agreement with the EU as well when it comes to that. What they mostly include is certainty around data flows. I fully agree with your concerns about data privacy. I would mention, however, that, given this precedent, we have managed to find really high protection standards on open digital trade. I would not say that they are balanced, but they can co-exist.
The way that we have done that is to have the right language in this trade agreement. Whether they are digital-only or full FTAs, they have very strong language around the parties to an FTA or a DTA having to have really high standards of data protection in their own national legislation. There is a commitment to that, and that is an international treaty, so it is a commitment in law.
Besides that, we have a very good commitment on data flows, which means that, unless there is any particular national security reason for which you need to restrict data flows, data can generally flow freely between the parties that have signed this trade agreement.
We have managed to find the right balance. We have examples of how we do that. Even in the case of the UK-US data bridge, we have basically shown that we can do a privacy-compliant data flows regime with a partner that builds on what the EU and the US have been working on for multiple years. We can do data flows at the same time and make sure that we have a high privacy standard.
Another difference between FTAs and DTAs is that the digital trade agreements we have so far—the Singapore one is a very good example—allow the two parties to be slightly more in tune with the pace of technology. If you are thinking of an FTA as a full-blown trade agreement that has taken many years to negotiate and to review, a digital trade agreement allows you to almost move with the technology pace and find new areas of co‑operation.
The one with Singapore has a couple of memoranda of understanding that accompany it in areas such as subsea cables or telecoms. Basically, it allows the two Governments, with the industry, to have new ideas and new mechanisms to push forward this co-operation on digital trade. It is a very interesting way. With the US, you can build even further, simply because we are such like-minded economies when it comes to technology development, innovation, R&D and so on. I hope that clarifies the question.
Q304 Chair: The EU and the UK have a trade and technology committee. Is that a mechanism that we should be aspiring to?
Sabina Ciofu: The EU and the UK have a full-blown trade agreement. As part of that, they have an implementation mechanism that you are talking about, which is to continue the dialogue on areas that we have agreed on in the trade agreement. We have that with all our trading partners. It is part of the process of using the FTA and bringing it up to date.
It is fair to say that the UK one has not had a lot of political momentum behind it for the longest time. There is now renewed commitment to it, so we can see more areas of co-operation there. The UK relationship is very special, simply because we have very similar approaches to everything when it comes to tech and services, mostly. That is probably the most advanced relationship, in a way, where you can talk about digital trade.
With the US, we will need to build from scratch. We do not have a free trade agreement. We have never done anything like this, so it is a new endeavour.
Q305 Alison Griffiths: Simon and Jonathan, building on what Sabina has just been talking about, do you have confidence, first of all, in the policing of previous trade deals, including the one with Singapore, which I know is highly commended by many, to protect the data flows that you were talking about and, secondly, to protect against espionage and bad actors?
Dr Thomas: From my perspective, not enough time has passed yet to really test that.
Q306 Alison Griffiths: What about previous deals? Sabina is saying that we have done this before. We just need to replicate that.
Dr Thomas: I just want to add a different lens to that, and Sabina did briefly mention it. The fact that technology is changing so quickly means that we have to have some flexibility. We cannot just rely on saying, “Because this worked in the past, it is going to work in the future”. There are so many different entities trying to break that system that we need to have some capability to quickly react and say, “We need to change this regulation this way or that way to give security.”
We could say that historical deals have worked, but it is not going to be the same in the future. We are under incursion now more than ever before. Historical deals have been good, but I would urge thinking about what is coming next and what is on the horizon now.
Q307 Alison Griffiths: Is there anything that you want to throw into that mix of what is on the horizon?
Dr Thomas: Quantum is coming soon, is it not?
Jonathan Legh-Smith: The quantum industry is not mature enough to be able to reflect on previous agreements. We are very much about trying to stimulate and encourage international collaboration and co‑operation at the Government level. That is really what we are looking for. We know that we have to protect. A lot of the effort and focus is on the really negative actors rather than generic protection mechanisms. It is about the select few countries that we really do not want to see intellectual property and technology going to. That really was the motivation, as we understand it, for the export controls, which, of course, is quite a heavy thing that we are working around.
Q308 Charlie Maynard: I refer members to my entry in the register of interests. Jonathan, in terms of quantum, there are various national quantum strategies and missions, which may or may not be helpful. I really want to hear your thoughts as to what you would most like to see happen in the UK. What are those key barriers? What would you like Government to be more or less involved in to nourish that quantum industry?
Jonathan Legh-Smith: I should have said in my opening remarks that the UK is in an exceptional position. We are second in terms of the number of start-ups in quantum, third in research publications and third in private investment. We are in a world-leading situation. Sorry, I have lost track of your detailed question.
Charlie Maynard: What can the Government do or not do that would help you?
Jonathan Legh-Smith: I was going to refer to the strategy and the programme, because we have a good strategy. We have a programme in place, but we are waiting to get on to the third phase. The priority has to be to commit to the next phase of the programme. It is not so much “new new,” but to make sure that we start, and start boldly.
We are currently in a holding pattern, really, and have been for the last year.
Charlie Maynard: Who is “we”?
Jonathan Legh-Smith: I mean the quantum industry. We have had maintenance for the last year or two since the publication of the strategy, despite the fact of having the programme. We need to see that start properly at the earliest opportunity, and that is what gives us the foundation or the anchor for UK businesses to then go out and engage internationally.
Q309 Charlie Maynard: Is this all necessarily state-led, or is it privately led?
Jonathan Legh-Smith: Historically, it has been 50:50. It is still a nascent industry that requires state investment to get this going, but we have seen huge amounts of private investment going in as well—almost 50% of the £1 billion that the UK has invested. We have demonstrated strong commitment from industry, but it still requires state investment.
Q310 Charlie Maynard: Given that there is a state-led aspect, what do you want from the UK Government now?
Jonathan Legh-Smith: We want them to invest in the national programme. We have a programme. We are waiting for the outcome of the spending review. It was built around a £2.5 billion, 10-year programme, so it is about making that real. Starting softly will just put the UK behind, probably irretrievably, so we need to start boldly and get on with the quantum missions, which you referred to at the beginning.
Q311 Chair: Can I ask a question about the US research environment? There are some arguments that the Administration is having with different United States universities. Presumably, that creates an opportunity for the UK to provide a more stable research environment for some of the world’s leading researchers from universities such as Harvard to come and study here in industries such as quantum.
Jonathan Legh-Smith: Yes, that is entirely possible. We have a very strong programme. One of the key assets of our programme is how integrated it is across academia, industry and Government, which does not exist in many other parts of the world, and particularly the US. The issues that are going on there are an opportunity to start inviting and supporting leading academics.
Q312 Chair: Should we be getting stuck in now to try to start recruiting those academics?
Jonathan Legh-Smith: It is not something that I had consciously thought about. I would say yes. We have done that with AI, where we had phased levels of fellowship programmes specifically targeted at bringing in international expertise, so I would certainly consider doing that in the quantum area as well, yes.
Q313 Sarah Edwards: I was just wondering whether you have thought about what changes there might need to be to the UK’s approach to the digital regulation aspects with the US to be able to reach a deal. Jonathan, might we have to make any compromises? Are we on the back foot on some of these areas?
Jonathan Legh-Smith: I do not think that we are on the back foot. Arguably, the UK is ahead in terms of considering the regulatory implications. There was a proposal published and then accepted by Government, essentially saying that we should be looking at regulations within the target sectors, such as telecoms, finance and the like, to understand what the particular potential impact of quantum technologies are on them, and then acting on that, rather than wading in and just regulating quantum technologies by themselves.
That is a very positive and pro-innovation approach, but we are working through that at the moment. There are some critical elements in that, such as making sure of the role of standards in helping drive the markets, which Sabina referred to. Responsible innovation is at the heart of that as well. We do not want to have to tidy up after ourselves, as we have had to do with AI, and UK industry is fully behind that. Arguably, we are setting the direction with that. We do not have hard lines as yet because it has not been crystallised.
Dr Thomas: From my perspective, coming from the hardware side of the world, there is something that I would urge us to think about. I highlighted it previously, and it is IP. The UK, as just discussed, has an incredible number of innovators, which means that a lot of the value in the UK is IP, whether that is patents, know-how or knowledge.
The US is making increasingly stricter rules on IP control, and that is all digital now. IP is all digitally communicated, whether that is the knowledge that I talked about passing between companies, but there are really strong indicators that the US wants to make sure that it maintains, ahead of other chip companies, its capability by making sure that it has control over IP, whether that is the import or export of goods that have that IP embedded, or the trading of that IP across borders.
If we do not look after one of our main assets, we will not have that to bargain with in the future. There is a critical time coming right now. It was 2022 when the US stated that they were going to have a real hard look at how IP is used around the world—either IP generated in and used outside the US, or IP generated outside and used inside the US. I know that it is a tangential thing, but it really folds into this whole look at the digital infrastructure, particularly as everything is becoming more and more digital day by day.
Q314 Sarah Edwards: Sabina, do you have any thoughts about what changes the UK might have to make to meet the standard that the US may expect us to do?
Sabina Ciofu: Thank you for that question. It is really important. I have seen mostly media reports around this rather than any meaningful conversation on negotiations, because they are still focused very much on tariffs and goods at the moment. For the industry, what is really important is legal certainty. If we have online safety legislation, we are fully focused on implementation and all the work with the regulators to get companies compliant. If we have a competition Bill, it is same thing.
All these rumours around, “We may have some legislation on the table. Maybe it is not on the table. Maybe we will look at implementation. Maybe we will look at enforcement”, is really not helpful, because it means that there is a lot of volatility around who needs to comply with what and whether laws can be changed or modified one way or another further down the line.
The legal certainty aspect of this negotiation is really important, and that goes hand in hand with consultation. Because of the nature of this negotiation, which is not exactly your traditional trade agreement consultation, with an impact assessment, designing a strategy for it and then having your stakeholder consultation throughout, it does feel fairly ad hoc. It also makes the industry panic over what could be negotiated without proper consultation.
The element that I would add here is a hope that, once we move into some more structured form of negotiations on a longer-term deal, which, hopefully, includes digital trade, as we have seen in the deal document in May, we will have a more structured consultation with the Government in the same way that we do for all the other trade agreements, so that whatever comes out of this is commercially meaningful and not necessarily a surprise to anyone. I would just make those two points.
Q315 Alison Griffiths: Leading on from that question, could I ask each of you what the red lines are that you would not want to be crossing? Simon, you are focused on the IP aspect. Jonathan, you mentioned that you were not sure whether you had any, so feel free to pass. Sabina, more widely, it would be really interesting to hear from you as well.
Sabina Ciofu: There are a few obvious ones. One is our freedom to regulate in the public interest. Whatever you decide in any trade agreement, there is some compromise on sovereignty so that you open your markets and provide more opportunities for your own market. That fundamental freedom to regulate in the public interest has to be there for any trade negotiation anywhere. That goes hand in hand with the consultation point that I made earlier, and making sure that not just the industry but civil society and everyone else is part of that conversation as we negotiate this.
The other element here is our commitment to international law. There is the commitment to the WTO and, while we still have the WTO alive and well, we need to make sure that whatever we agree in a bilateral agreement does not crosscut that commitment, and then there are our commitments in our bilateral trade agreements. Probably a good point to mention is the most favoured nation principle and making sure that whatever we agree with the US applies to all our trading partners in the same way, and that we take those elements into account. Those are what I would say are probably the fundamentals of how to go about this.
Q316 Alison Griffiths: In terms of any red lines in the negotiating room, is there anything that you would recommend to the Secretary of State that he does not do?
Sabina Ciofu: Other than not undermining your own laws when you negotiate a trade agreement, which weakens the Government’s negotiating position, we do not have anything. It is not our place to say, “Take that, that and that off the table.” It is a complicated negotiation; we fully understand that. However, it is a balancing act of, “What are you giving up and what are you getting out of this negotiation?” It is not necessarily entirely clear how this will play out and what the offensive and defensive asks in this negotiation are as we move into a more structured phase.
Making sure the negotiation is rooted in a proper consultation with all your stakeholders is probably how this is going to work out, and nobody will be surprised by any outcomes.
Dr Thomas: You have hit the nail on the head with what I am going to say. I am really concerned about the future of IP. As I say, as it becomes more and more digital, we have this problem whereby it can be either intercepted for nefarious reasons or used incorrectly by somebody, unless the legislation and regulation is put in there, even around things such as understanding how a particular type of information can be used in a digital transaction if it is not something that is standard. Those types of rules could be really destructive.
We have a national asset of IP generation and, if we do not consider that in the digital world, I can guarantee that we will regret it. I agree with Sabina that you cannot walk in there with a red line, but we also have to understand how much economic security we want. If we walk into a deal with the US and start to look at other markets that we cannot access because of that deal, what happens in the future? Economic and national security need to be considered in the deal as well, but, for me, it is really all about IP.
Q317 Alison Griffiths: Jonathan, what would make you walk away from the deal?
Jonathan Legh-Smith: I would offer two assessment criteria rather than specifics. I recognise the loss of IP. I am more concerned about the loss of our companies through it just being easier to move to the US or be acquired by US companies—anything that creates an imbalance that makes it easier to just go that way for entrepreneurs and investors to realise their investment or to try to develop it in the US.
The other would be anything that would compromise our hard-fought entry back into the EU quantum programmes. It has been years and a lot of hard work to get us involved and get UK companies and academia access to the European quantum investment programmes. Anything that compromised that would be unfortunate.
Q318 Chi Onwurah: This has been a fascinating discussion. I have two points of clarification. Jonathan Legh-Smith, you seem to imply that you would be looking for access to quantum industry support programmes in the US for UK companies. Is that right, or did I misunderstand that as part of any digital deal?
Jonathan Legh-Smith: Yes, for UK companies to have trusted status to be able to access those. The most obvious things such as the DARPA programmes are likely to be very influential. There are also a lot of pre‑procurement exercises going on at the regional government and state level, where just being able to get involved and being eligible as a trusted partner would be useful.
Q319 Chi Onwurah: I imagine that would imply reciprocal access to UK procurement and support programmes.
Jonathan Legh-Smith: Yes.
Q320 Chi Onwurah: Sabina Ciofu, I very much appreciated your discussion about the Online Safety Act. You did not mention the digital services tax. Is that issue raised with you by your members? Would you want to see UK sovereignty to determine the digital services tax?
You seemed to imply a timescale and that—maybe this is my misunderstanding—you had not been consulted yet. There is a minimum timescale for which these negotiations could be expected to last from when consultation happened. Could you just clarify that?
Sabina Ciofu: On the digital services tax, we know as much as you. We know it has been on the table for these negotiations. Again, it is the Government’s negotiating position to consider all their instruments. Ideally, our point here would be that, if you are considering digital concessions, consider them in the context of digital wins. The danger here is that we are considering digital concessions for wins in other parts of the economy. Given that the UK is 80% services, 75% of which are digitally delivered, we really need to focus on the digital trade aspects of this negotiation for it to be really meaningful.
On the timeline, again, I do not know. It is my assumption that, given that we got this deal in May, and there are a million other priorities for Washington right now, negotiating a full digital trade agreement with us may not be the No. 1 priority there, so I am assuming a slightly longer timeframe for that negotiation.
Also, as I am sure you have heard in previous panels, there are still millions of other things to sort out on the tariff discussions coming out of the deal in May. I may be completely wrong, but I would assume that there is a slightly longer timeframe for a digital trade negotiation or a bigger trade negotiation following this phase of sorting out the tariff conversation.
Chair: That takes us out of time. Thank you very much indeed to our witnesses for your evidence this afternoon. News is just breaking that we may expect an executive order from the White House very shortly confirming 50% tariffs on steel, so the urgency of this discussion is really quite important. Thank you very much for helping ensure that we go into the Committee’s visit to Washington next week fully prepared. That concludes this panel and this session.