The committee said that if the UK did not reverse the trend of innovative British technology companies moving to other markets or selling to foreign companies, the country would see a decline in global competitiveness, weaker economic growth and a ‘brain drain’ of talented people abroad.

Barriers to successful scaling up in the UK include limited access to capital compared with other countries, challenges in recruiting in-demand tech talent and a business and investment culture that can be too risk averse, the committee warned.

The committee welcomed the government’s recent AI Opportunities Action Plan, but said that a “mindset shift” was required to make the UK the best place to scale an AI business.

In addition, the committee criticised a “complicated ‘spaghetti’ of well-intentioned government schemes”, including financial reforms, tax credits, investment incentives and innovation focused initiatives, as introducing further barriers and bureaucracy.

Therefore, the committee called on the Government to resist the urge to launch new schemes, and instead focus on consolidating and streamlining existing programmes for maximum impact.

Other key recommendations included making sure the government’s industrial strategy provided a “coherent, cross-sector vision for how technology scaleups will be supported to drive economic growth”.

Accelerating financial reforms, championing entrepreneurs, committing to removing obstacles for AI growth and streamlining public support for innovation were also supported by the committee.

Baroness Stowell, chair of the House of Lords Communications and Digital Committee, said: “The UK has the potential to be a powerhouse of growth for AI and creative tech companies. However, we are at real risk of becoming an incubator economy instead, where UK start-ups develop innovative products and services before selling out or moving abroad, so other countries derive the economic benefit.

“Action must be taken to unravel the complex spaghetti of support schemes available for scaleups. Various tax credits, British Business Bank funds and investment incentives combine to be so hard to navigate that companies have to employ consultants to advise them. We urgently need to simplify the help available and ensure it is set up to support our most innovative scaleups to grow, while also offering value for money to the taxpayer.

“The Government must be ambitious in its approach for our brightest AI and creative tech scaleups, ensuring that the UK’s most innovative companies receive the recognition and support they need and deserve.”