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1、FEBRUARY 2025ENSURING THAT THE UK CAN CAPTURE THE BENEFITS OF QUANTUM COMPUTING2Ensuring that the UK can capture the benefits of quantum computingThis report has benefitted from interviews with people working in the UK quantum industry.We are grateful for their time and knowledge.The interviewees wo

2、rked for IBM,Nu Quantum,Oxford Ionics,OQC,Quantum Motion,Riverlane,Universal Quantum,and UKQuantum.The contents of the report does not necessarily reflect their views or those of their employers.The report was made possible thanks to IBM and OQC.Image courtesy of OQC3Ensuring that the UK can capture

3、 the benefits of quantum computingTABLE OF CONTENTSForeword 4Executive summary 61.Introduction 102.Potential benefits of quantum computing 122.1 Quantum computing will bring economic benefits 122.2 Industrial processes that benefit from quantum computing 132.3 Many end-user customer industries may b

4、enefit 163.Quantum computing inthe UK 203.1 Characteristics of quantum computing firms operating in the UK 203.2 Large technology firms involvement in quantum computing 233.3 The quantum sectors supply base 244.The UK funding landscape 264.1 The economic imperative for investment in quantum computin

5、g 264.2 Rationale for governments to invest in quantum computing 274.3 UK government funding for quantum computing 284.4 Other major powers investment in quantum computing 304.5 Private sector funding and the valley of death funding challenge 345.The economic impact of the quantum computing sector 3

6、85.1 The quantum computing industrys current economic contribution 385.2 The quantum computing industrys future economic contribution 416.The economic benefits quantum computing delivers to the end usersectors 466.1 Estimating the productivity gains from quantumcomputers 466.2 Further impacts of qua

7、ntum computing on end user industries 547.Conclusion 56Appendix 1:Productivity gains by industry 58Appendix 2:Methodology 60Cover image:S4Ensuring that the UK can capture the benefits of quantum computingFOREWORDThe world is undergoing the fastest technological revolution in history.Breakthroughs in

8、 areas related to artificial intelligence are already enhancing our productivity at work,helping discover new treatments for illnesses,and making our public services more efficient.But while the imagination of the governments,businesses,and the general public have rightly been captured by these deve

9、lopments,AI is but one of a number of keystone technologies that will define the 21st Century:quantum is another.Scientists are making ever-greater progress in unlocking the secrets of how subatomic particles interact with one another,and this knowledge will help unlock progress in other technologie

10、s.Quantum sensors will enable detailed images to be created at resolutions and distances previously unimagined,with applications from better healthcare diagnostics to assessing mineral deposits deep below the surface of the Earth.Quantum navigation systems will enable accurate geopositioning without

11、 the use of satellites,neutralising the impact of potential attacks on satellites.Most exciting of all,by replacing the 1s and 0s bits of digital computers with atomic qubits quantum can revolutionise computing and allow more complex equations and tasks.Quantum computing could transform our knowledg

12、e of human biology and medicine.Rather than spend billions testing different chemicals at random to find new antibiotics,we could model their impact and isolate the most promising ones to take forward.On climate change,quantum-powered modelling could help us understand the chemical reactions that po

13、wer batteries to make them longer lasting,or work out how to improve the Haber-Bosch process to make fertiliser less energy intensive.1 Department for Science,Innovation and Technology,“Over 100 million boost to quantum hubs to develop life-saving blood tests and resilient security systems”,July 202

14、4.2 Department for Science,Innovation and Technology,“Over 100 million boost to quantum hubs to develop life-saving blood tests and resilient security systems”,July 2024.3 Ministry of Defence and Defence Science and Technology Laboratory,“Top secret lab develops atomic clock using quantum technology

15、”,January 2025.4 Google,“AlphaQubit tackles one of quantum computings biggest challenges”,November 2024.It is an exciting time for quantum,with advances being made in many of these different areas.Last year,the UK Government announced five new quantum research hubs backed by 100 million,including a

16、hub at the University of Oxford,which will help develop the practical use of quantum technology in areas like medical scanners,secure communication networks,and next-generation positioning systems.1 In the United States,the government has recently approved new cryptography standards to keep personal

17、 and business information safe in the quantum age.2 A new quantum clock developed by the UKs Defence Science and Technology Laboratory can enable more precise and independent navigation systems.3 Meanwhile,Google DeepMind has recently created AlphaQuibit,an AI-based decoder that identifies quantum c

18、omputing errors with state-of-the-art accuracy,which is expected to accelerate progress on building a reliable quantum computer.4 It is essential that the UK and our democratic allies around the world lead in the global race for technology,including in quantum.Whichever countries do so will reap the

19、 greatest economic benefits and be able to write the rulebook for how these technologies function.The difference between a world in which keystone technologies like AI and quantum are designed by free societies to be safe,reliable,and compatible with human rights,and one in which authoritarian state

20、s set the rules of the road,cannot be overstated.Advances in quantum encryption also create huge challenges around the security of data and intelligence.Whether China or the West secures leadership in quantum will have a seismic impact on the defence and security of our country and our allies around

21、 the world.5Ensuring that the UK can capture the benefits of quantum computingThe UK has significant advantages in the race for quantum.Our country is home to some of the strongest universities in science and technology in the world,training the next generation of entrepreneurs who will drive the pr

22、ogress and commercialisation of quantum.Britain has the deep capital markets required to fund and scale the quantum companies of tomorrow.If supported sufficiently by government,the UKs quantum industry has the potential to be a global leader.Yet the complexity of quantum mechanics which makes this

23、branch of science so integral to our countrys future can be very challenging for policymakers.Very few people in parliament understand quantum.Political leaders will need to become accustomed to an uncertainty principle that is not just about the next election.For those of us who already recognise t

24、he importance of quantum to the future of the UK,our challenge is to encourage more people in Government to do so.This timely report will be instrumental in meeting that challenge.Setting out clearly the benefits of the UK leading in quantum technology,this analysis from Oxford Economics shows how o

25、ur countrys quantum industry could by 2045 boost productivity by more than 7%and so contribute an extra 212 billion to our economy.Critically,the productivity gains in our crucial industries of the future,from pharmaceuticals to financial services,will be even higher.All of us who are serious about

26、turbocharging long term,sustainable growth in our country,or ensuring that our country can defend itself,will need to read this report carefully.Oxford Economics rightly underscores that the success of the UKs quantum industry depends on action from both industry and government.Only by ministers and

27、 tech companies working together can the UK take the quantum leap required to unleash growth and safeguard our security.Rt.Hon.The Lord Hague of RichmondRt.Hon.The Lord Hague of Richmond,born in Rotherham in 1961,grew up in South Yorkshire.He studied PPE at Magdalen College,Oxford,where he became Pr

28、esident of the Oxford Union and graduated with First-Class Honours.After university,he worked at Shell UK and McKinsey&Co.Entering Parliament in 1989 as MP for Richmond,he played a key role in the 1995 Disability Discrimination Act and served as Secretary of State for Wales.He was elected Conservati

29、ve leader in 1997,and ran the party until 2001.After that he focused on writing,winning acclaim for biographies,and worked as a columnist.Returning to politics in 2005,he became Foreign Secretary in 2010.After leaving frontline politics in 2015,he joined the House of Lords as Lord Hague of Richmond

30、and took on leadership roles in business,charity,and media,including chairing The Royal Foundation and co-founding United for Wildlife with Prince William.Aninfluential commentator,he has co-authored papers on science and AI policy.In 2024,he was elected Chancellor of Oxford University.6Ensuring tha

31、t the UK can capture the benefits of quantum computingEXECUTIVE SUMMARYQuantum computers have the potential to be millions of times more powerful than todays supercomputers.Experts expect that by solving computational problems that are either impractical or impossible for traditional computers to pe

32、rform,quantum computing will lead to significant advancements throughout the economy.Examples of possible commercial applications include reducing the research and development(R&D)costs in drug innovation and improving the design of renewable technologies such as solar PVs and batteries.Quantum comp

33、uting is an emergent technology in which the UK has considerable research strengths.Quantum technologies are in their infancy with the average UK quantum computing firm(excluding large technology companies like IBM)only five years old.Currently a leader in the quantum ecosystem,the UK is home to the

34、 largest number of quantum start-ups in Europe.This reflects the UKs considerable research strengths with nearly half of UK quantum hardware firms and a third of UK quantum software firms the result of spin outs from UK universities.A 7%gain in productivity across the entire economy by 2045,equivale

35、nt to additional GVA of up to 212 billion.If appropriately funded,the UKs quantum ecosystem could deliver significant economic benefits in the future.Although currently only in its infancy,we estimate that with appropriate funding,the industry could support a gross value added contribution to UK GDP

36、 up to 11.0 billion by 2045.This projection would suggest 1 in every 579 generated in the UK economy in 2045 will be dependent on the UK quantum computing sector.A larger economic benefit ispredicted to accrue to end user sectors.We estimate that the successful deployment of quantum technologies by

37、2035 will lead to a 4%economy wide productivity gain by 2040,this is equivalent to an additional 98 billion in gross value added in 2040 and up to 212 billion in 2045.This is equivalent to every worker in the UK achieving an additional one and a half weeks worth of productivity per year without work

38、ing an extra hour.The scale of this impact emphasises the importance to the future of the UK economy of investing in quantum computing and making the best use of the technology.Successful deployment of quantum technologies earlier,by 2029,would bring forward the productivity gains.Policy and fiscal

39、reforms to drive adoption now,could see a boost of 5%to UK productivity by 2035.Economy-wide productivity gain forecasts under different adoption timescales Potential productivity forecast 2035 version Potential productivity forecast 2029 version 20351%5%20457%8%20508%8%Source:Oxford EconomicsQuantu

40、m technologies are expected to play a significant role in the delivery of UK government infrastructure including national security systems and the electricity grid that will support long-term economic growth.Quantum use cases outside of government infrastructure range from optimising logistic routes

41、 and financial trading to aiding R&D in areas such as pharmaceuticals and financial services.For these sectors of the economy,we estimate that the productivity benefit will average 29.6%by 2045.With industries like pharmaceuticals spending 30%of revenues on R&D costs,it is not difficult to see how q

42、uantum technologies could have a material impact on industries productivity.7Ensuring that the UK can capture the benefits of quantum computingWithout sufficient funding,the UK risks losing an innovative,extremely productive sector.To achieve widespread commercial use and forecast economic benefits,

43、quantum technologies need further development and significant financing.However,these funding needs remain unmet,with UK quantum firms struggling to secure adequate capital to scale domestically.While the UK fosters innovative start-ups,it is widely acknowledged that it fails to capitalise on these

44、strengths due to financing constraints.With global investment in quantum technologies increasing at a rapid rate,the UK risks losing its initial advantage.Governments around the world are realising the importance of having quantum computing and are committing large sums of public money to the techno

45、logies.As quantum firms are currently struggling to find the necessary scale up funds in Britain,UK-founded companies are pivoting their focus abroad.With many UK quantum computing companies already having an overseas presence,it is relatively easy for companies to shift their centre of gravity towa

46、rds countries with better funding opportunities.2.5 billion in funding was announced by the previous Government but there has not been a recommitment of this funding level by the new Government.There is a strong national security rationale for government to invest in UK quantum capabilities.Experts

47、expect that quantum computing technology is likely to play an integral part in a countrys critical infrastructure,and defence.Having domestic quantum capabilities means governments are better protected from outside threats from foreign states.Increasingly,governments around the world are recognising

48、 the importance of quantum technologies to national security with many large-scale funding announcements being made by defence departments.Future financing needs are considerable,with experts in the field estimating that the cost of developing a fully scaled quantum computer will cost hundreds of mi

49、llions,if not billions of pounds.Given the costs,risks,and the timescales required,it is not realistic to expect that this goal will be reached with commercial funding alone.While French and Australian governments are responding to funding requirements and have announced hundreds of millions of doll

50、ars of funding to specific quantum companies,the UK government is only committing a fraction(less than 10%)of this.We have already seen several of the UKs quantum firms react to funding shortages in the UK by relocating headquarters abroad,merging with foreign firms,or setting up subsidiaries abroad

51、.Hardware firms in particular face especially large shortfalls in funding due to higher associated costs and risks.Current UK Government(quantum hardware)funding is more than 10 times smaller than peer nations.There is also a need to bring academic funding and commercialisation efforts closer togeth

52、er.Hitherto,some quantum firms have failed to access commercialisation expertise early enough,so have faced challenges when they spin out.In order for the UK to realise the economic gains from quantum technologies,both industry and government have important roles to play.Scale and certainty of gover

53、nment financing will incentivise quantum businesses to continue to keep operations in the UK.Government acting as an“intelligent customer”through procurement schemes can help quantum companies refine and develop their product for commercial use.Moreover,it can help to“crowd in”private sector investm

54、ent by boosting credibility and confidence in individual quantum start-ups.At the industry level,large technology companies such as IBM are critical to facilitating future advances in quantum technologies.This includes enabling collaboration within the quantum ecosystem and providing platforms on wh

55、ich smaller users can run quantum computing applications.8Ensuring that the UK can capture the benefits of quantum computingQuantum computers will solve problems that traditional computers cannot.This will lead to significant advancements throughout the economy.63%of quantum hardware companies and 7

56、5%of quantum software companies operating in the UK were spun out of a UK university or founded here.QUANTUM COMPUTINGHOW IT COULD BENENFIT THE UK ECONOMYTHE UK QUANTUM INDUSTRY NOWThe UK is home to the largest number of quantum start-ups in Europe.9Ensuring that the UK can capture the benefits of q

57、uantum computingTHE RACE FOR FUNDINGWHAT THE UK COULD LOSE?There is now an international race to master and commercialise these technologies to control the supply chain,because of their economic and security impacts.UK quantum companies currently struggling to get adequate financing to scale up in t

58、he UK.Risk they will move abroad or lose their staff to richer funding environments.China has already spent$15bn on quantum R&D.US government expects to spend over$900mn in 2024under its National Quantum Initiative.In 2023,German government committed to spend$2.25bnover three years.By 2045,the quant

59、um industry could support up to 11.0bn in contribution to UK GDP and up to 126,100 jobs.The productivity gains in some end user industries could be significantly higher by 2045 if quantum technologies are commercialised earlier.Adopting quantum is expected to lead to a 7%gain in productivity across

60、the entire economy by 2045,equivalent to additional GVA of up to 212bn.Productivity gainSource:Oxford EconomicsElectricalmanufacturingPharmaceuticalsOil and gasDefenceBusinessservicesTransportChemicalproductsFinancialservicesAgriculture26%25%22%16%16%13%13%12%5%54%54%46%33%32%26%26%24%10%Potential p

61、roductivity forecast(2035)Potential productivity forecast(2029)10Ensuring that the UK can capture the benefits of quantum computing1.INTRODUCTIONQuantum computing represents a new generation of computers which harness the principles of quantum mechanics to solve complex problems which are difficult

62、or impossible for classical computers to solve.The technology offers the hope of bringing operational and R&D benefits to many industries,boosting their productivity,with the scope for stimulating new discoveries and further innovation.5 McKinsey&Company,“The quantum technology monitor:Facts and fig

63、ures,September 2021”,2021.Quantum computing technology is not yet mature,with the length of time taken for the sector to reach maturity currently unknown.It will take considerable expenditure on R&D and live operations to bring the industry to its full potential.In the quantum hardware sector,there

64、is considerable uncertainty over which of the quantum modalities will be the first to operate at sufficiently high a level to be able to become commercially useful across a broad range of customer types.The future potential of other areas of quantum computing(quantum software,quantum sensing,and qua

65、ntum communications)is closely tied to the development of the quantum hardware sector.The UK government faces a number of strategic decisions.It must decide where the UK is best placed to capture value from the quantum ecosystem and,with this in mind,the extent it should fund the development of quan

66、tum computing.This is not simply a question of economics;some of the sectors that will likely become end users of quantum computing technology when it matures are defence and cyber security.Critical infrastructure like the National Health Service and traffic management systems may also be significan

67、t users.Policymakers need to decide the extent to which the UK needs to develop and maintain its own quantum capability and how those capabilities should be deployed in respect to strategically important sectors.The UK has considerable strengths in quantum technologies.It was the first Western count

68、ry to have a National Quantum Strategy and is home to the largest number of quantum start-ups in Europe.5 Many quantum firms have been spun out of UK universities,which reflects the UKs considerable research prowess.However,competition is increasing with global investment in quantum technologies exp

69、anding at a rapid rate.Many western nations have now developed their own quantum strategies and are committing to significantly more public funding into quantum technologies than the UK.As UK quantum companies grow,they will require increasingly large amounts of funding.The UK risks losing its initi

70、al advantages if UK firms leave for richer funding environments,or being left behind in the global race for quantum advantage.This report,commissioned by Oxford Quantum Circuits Limited(OQC)and IBM,investigates the importance of the contribution of the UKs ecosystem to the economy.It looks at indust

71、ry population and how it is funded relative to its international competitors.It also explores what the industry could become and the benefits it might bring to end user customers in the UK in the future.11Ensuring that the UK can capture the benefits of quantum computingThe report is organised as fo

72、llows:Chapter 2 provides a brief introduction to quantum computing,the economic benefits it may bring,and the industries that will likely benefit.Chapter 3 looks at firms in the quantum computing sector,examining both the large technology quantum companies that are involved in quantum computing and

73、the smaller quantum hardware and software companies.Chapter 4 investigates how the quantum computing sector is currently funded,arguments for public sector funding,and how public sector funding compares to other competing nations.Chapter 5 quantifies the economic impact of the quantum computing indu

74、stry in 2024 and how it is forecast to grow in the future.Chapter 6 looks at the productivity benefits quantum computing will bring to end user industries in the UK and how it may foster future innovation.Chapter 7 concludes.Image courtesy of IBM12Ensuring that the UK can capture the benefits of qua

75、ntum computing2.POTENTIAL BENEFITS OF QUANTUM COMPUTINGThis chapter looks at the economic benefits quantum might bring.It discusses how it will impact productivity and foster innovation.It then delves into the types of processes and industries that might benefit.2.1 QUANTUM COMPUTING WILL BRING ECON

76、OMIC BENEFITS Quantum computing introduces a revolutionary approach to computational problem-solving by leveraging quantum mechanical properties to tackle intricate challenges with extraordinary computational speed and efficiency.These two benefits will boost the productivity of the industries that

77、use quantum computing,enabling them to better combine the labour and capital equipment they employ.As adoption becomes widespread among end user industries,it will likely lead to new discoveries or hasten their arrival.This will foster the invention of new products and processes,leading to the openi

78、ng up of new markets.At the moment,quantum computing hardware and the software that will run on it are still under development.We cannot know how and the speed at which they will impact productivity in the UK and global economy.But we can speculate that they will follow a similar path as other recen

79、t technological innovations.Fig.1 models the three phases of future UK productivity growth as it is impacted by quantum companies.The first phase is pre-quantum,where the productivity growth is driven by the development of workers skills,technological change,management practices and changes in other

80、 inputs.The rate of growth is relatively subdued.Fig.1:Illustration of how quantum computing may impact UKproductivity gross value added per head(Thousands)Source:Oxford Economics237525501001251500273543593139475325334129374551495755Pre-quantum(or what is now beingtermed the“Pre-MegaQuOp”)Adoption o

81、f quantum(known as the“MegaQuOpto GigaQuOp transition”)Potential new discoveries(known as“TeraQuOpand beyond”)13Ensuring that the UK can capture the benefits of quantum computingThe second phase occurs after quantum hardware has been successfully developed and becomes readily available to end user i

82、ndustries.It seems likely the starting point of this phase will evolve over a period,rather than occur at a particular point in time as depicted in the figure.This view reflects the expectation that initially the supply of quantum computers will be limited.As supply grows,different hardware companie

83、s will innovate their products improving their technological characteristics.It is likely this competition will eventually drive the price to access quantum computing time down.Both factors will increase the speed of adoption by end user industries.6 IBM Quantum,“Industry and use case”,2024.7 BCG,“W

84、hat happens when if turns to when in quantum computing?”,July 2021.8 McKinsey&Company,“Quantum computing:An emerging ecosystem and industry use cases”,December 2021.The speed of the adoption of the technology will in part be driven by the development of the quantum software.This sector will also gro

85、w,as competition and market dynamics drive the sectors offering and the make-up of firms within it.As the number of applications and tasks it can be used for grow,greater number of firms will become prospective customers for quantum computing time.As a result of the evolution of both the hardware an

86、d software,customer adoption will boost their own and the UK economys productivity.The rate at which UK productivity increases(the gradient of the line in Phase 2)will depend on the speed of diffusion of the quantum technology among prospective customers and the scale of the impact on firms.Unlike t

87、he gradient in the line,this will be uneven,probably slow at first,then gathering pace until it achieves full potential and flattens out.The third phase is the growth in productivity due to the new discoveries the technology will enable.It is likely the rate of discoveries will be uneven.The product

88、ivity boosts will occur subsequently,as a discovery is made and commercialised.It also seems likely the scale of the impact of the different discoveries on productivity will vary.So the trajectory of productivity growth will be more volatile in the third phase.2.2 INDUSTRIAL PROCESSES THAT BENEFIT F

89、ROM QUANTUM COMPUTINGExamples of industrial processes where quantum computing will likely accelerate solutions include:6,7,8 Optimisation:finding the best solution to complex problems.This has the potential to optimise the management of areas like traffic flow or energy grid optimisation,as classica

90、l computers struggle to find the most optimal solution to these sorts of complex problems.Machine learning:with machine learning technologies requiring the processing of very large datasets,quantum technologies can enhance the efficiency and speed of machine learning processes.There are many potenti

91、al applications;for example,accelerating the development of automating image analysis for clinical diagnosis and the development of superior fraud detection systems.Simulation:simulation of real-world phenomena(such as the behaviour of chemicals),which classical computers are largely unable to repli

92、cate.This has large potential in areas such as drug discovery.14Ensuring that the UK can capture the benefits of quantum computingHOW QUANTUM COMPUTERS DIFFER FROM CLASSICAL COMPUTERSQuantum computers differ from classical computers in several key ways:1.Quantum systems can exist in multiple states

93、simultaneously:This contrasts with classical computers which can only exist as a 0 or 1.This allows quantum computers to process many inputs at once,significantly enhancing their efficiency.However,developing effective quantum algorithms remains a challenge.2.A phenomenon called“entanglement”means q

94、uantum computers can perform complex calculations more efficiently than classical computers:Qubits are the basic unit of information in quantum computing and are found in quantum computing chips.When these qubits become entangled,they can share and determine information instantly,allowing a quantum

95、computer to be significantly more powerful than a classical one.3.Quantum states are very fragile which causes challenges.The interactions of qubits create quantum states,but they are fragile and sensitive to vibrations which poses a significant challenge.These unwanted disturbances are referred to

96、as“noise”and can affect the accuracy of calculations.Various methods are being explored to reduce noise.For hardware,examples of techniques include creating vacuums and using low temperatures to combat this,but these methods are costly.There are also software techniques,“error mitigation”,which can

97、be used to extrapolate noise out from observables using classical statistical methods,although these are expensive to use in terms of the need for additional processing time and classical resources.In theory,quantum computers have the potential to be millions of times more powerful than todays super

98、 computers.However,for quantum technologies to have widespread commercial application,four main challenges need to be addressed:1.Reducing noise:Developing qubits that are less prone to errors and can perform more reliable operations.2.Increasing qubit count:Scaling up the number of qubits to enhanc

99、e computational power.3.Building infrastructure:Developing the necessary hardware,like cooling systems,to protect qubits from noise.4.Achieving error correction:Creating systems that can operate without significant errors.There are several quantum computing hardware platforms,known as quantum modali

100、ties.Qubits are created through these modalities:1.Trapped ions:uses cooled ions(charged atoms)in a vacuum chamber.2.Neutral atoms:uses laser cooled neutral atoms manipulated by optical tweezers.3.Silicon spin:harnesses the intrinsic spin of electrons.4.Photonic:uses photons(particles of lights).5.S

101、uperconducting qubits:uses superconducting circuits.15Ensuring that the UK can capture the benefits of quantum computingIt is unclear which and how many of the modalities will ultimately prove both technological and commercially successful.The quantum computing field is entering an important phase o

102、f development,with the industry converging on new metrics to measure progress.The field is evolving beyond what was previously termed the noisy-intermediate scale quantum computing(NISQ)era.9 This was a period when quantum computers were prone to errors due to imperfections and environmental interfe

103、rence.The industry is now working towards MegaQuOp machines(capable of Millions of quantum operations),with the goal of advancing to GigaQuOp(billions of operations)and eventually TeraQuOp(trillions of operations)capabilities.9 John Preskill.“Quantum computing in the NISQ era and beyond”,accessed De

104、cember 2024.10 OQC Tech,“What is quantum computing?A beginners guide”,accessed October 2024.11 BCG,“The long-term forecast for quantum computing still looks bright”,July 2024.These developments will enable increasingly complex computation problems to be solved.Most of the existing quantum computers

105、also contain between 100 and 1,000 qubits,which experts agree are not yet able to compete with classical computers.To achieve the full potential of quantum computers,millions of qubits are needed.10 Market projections suggest that the quantum computing field will remain in its current“NISQ”phase unt

106、il around 2030,at which point it will achieve MegaQuOp capabilities,transitioning to GigaQuOp by 2035 and TeraQuOp capabilities(where full scale fault tolerance removes virtually all risks of failure by approximately 2040.11Image courtesy of OQC16Ensuring that the UK can capture the benefits of quan

107、tum computing2.3 MANY END-USER CUSTOMER INDUSTRIES MAY BENEFIT12 BCG,“The long-term forecast for quantum computing still looks bright”,July 2024.13 Gross value added is the contribution each firm or sector makes to UK GDP(the main measure of a countrys economic output).It is easiest thought of as th

108、e difference between the value a sectors output is sold for minus the cost of bought in inputs of goods and services that are purchased and used up in the production of that output.14 ONS,“Annual Business Survey,2022 results.”,April 2024.15 Combination of NACE 84:Public administration,defence&social

109、 security,NACE 30.3:Aerospace Manufacturing and NACE 35.1:Electric power generation and distribution.Likely underestimate due to healthcare being excluded16 NACE 49-53 Transport&Storage Services17 ONS,“Low carbon and renewable energy economy estimates”,March 2024.In conjunction with the gross value

110、added to gross output ratio applied according to ONS Input-Output tables,2024.Several authors have speculated on the industries that will benefit the most from quantum computing in the future.12 This is when the technology matures and becomes widely adopted across the economy.We summarise these in F

111、ig.2 with some possible uses to which each industry might put the technology.The industries have been ordered according to their importance to economic output in the UK,namely,their gross value added contribution to UK GDP in 2022.13,14Fig.2:Different industries possible future uses of quantum compu

112、ting and their importance to economic output in 2022IndustryUse CaseGVA(billion)%of UK GDPFinancial services Mitigating against cyber risk and improving fraud detection systems through improved processing capabilities.Improving portfolio optimisation through enabling the development of more advanced

113、 trading strategies.Improving banks risk analysis,resulting(for example)in more accurate credit scoring.Significantly reducing the calculation time for pricing derivatives with quantum technologies having the potential to reduce calculation time from days to hours.1979.0%Defence Enhancing intelligen

114、ce efforts through improved pattern recognition and decryption capabilities.Improving land,sonar,and underwater surveillance abilities.Aiding the design of aircraft.138156.3%Critical Infrastructure Using quantum simulations to optimise the electricity grid,enabling more efficient decisions with rega

115、rd to energy distribution and generation.Better detection of vulnerabilities within security networks which enhances abilities to detect cyber threats.Transforming diagnosis and detection in healthcare.Logistics Optimising delivery routes and fleet networks through real time computation of variables

116、 such as weather and port availability.Optimising supply chain management through more sophisticated stress testing of supply networks.77163.5%Transport Facilitating autonomous driving through enabling machine learning systems.Aiding infrastructure planning and reducing traffic congestion through si

117、mulating highly complex traffic systems.Renewable Energy Aiding the design of several renewable energy technologies through improved identification of new or improved materials or designs.Technologies include batteries,solar PVs,and hydrogen storage.36171.7%17Ensuring that the UK can capture the ben

118、efits of quantum computingIndustryUse CaseGVA(billion)%of UK GDPAdvertising and market research Accelerating the speed at which generative AI can process data,enabling more efficient marketing and advertising of products.231.0%Agriculture Facilitating technological breakthroughs through streamlining

119、 R&D costs(see chemicals products section).Examples include creating more environmentally safe chemicals that protect crops.190.9%Extraction activities Identifying materials for carbon capture technologies.Enabling more advanced modelling of geological formations which will aid in exploration.Moreov

120、er,quantum computing has the potential to create better systems to detect and locate leakages.190.9%Automotive Optimising production processes through improved computation and simulation of supply-chain networks.Driving efficiencies through increasing speed and precision of prototyping.This will hel

121、p manufacturing industries such as the automotive sector.160.7%Pharmaceuticals Identifying promising compounds and molecules that can become the basis for new drugs.Reducing production costs through making new product formulations with less expensive ingredients.160.7%Chemicals Reducing R&D costs th

122、rough predicting molecular processes,thus eliminating the need for trial and error lab-based experiments.Reducing energy and thus production costs by reducing supply chain spend and through facilitating the development of catalysts through quantum simulation techniques.130.6%Total 54125%Source:Oxfor

123、d Economics,ONS ABS and LCREE dataset18 Labour,“Mission-driven government”,2024.These use cases exemplify the scale of the potential for quantum computing to result in significant productivity gains across the economy.The sectors most likely to benefit from quantum technologies make up approximately

124、 one quarter of the UK economy and it is likely that other sectors of the economy will also be positively impacted(including the functioning of part of the UKs critical infrastructure which does not fit into statistical industry definitions).As such,there is clearly huge potential for quantum techno

125、logies to boost the UKs economic growth,the first of the Labour governments missions.1818Ensuring that the UK can capture the benefits of quantum computing2.3.1 Quantum computings impact on R&D Given that a key future function of quantum computing is likely to be through aiding the R&D process,anoth

126、er way to get a feel for which UK industries 19 ONS,“Business enterprise research and development,UK:2022”,February 2024.20 ONS,“UK input-output analytical tables:product by product”,December 2024.might benefit the most is to look at which industries currently spend the most on R&D.Fig.3 details the

127、 R&D spend by four industries that we expect quantum technologies will benefit.In 2022,these four industries spent 16.9 billion on R&D,which is approximately one third of the total R&D spend in the UK economy.To give a sense of the scale,this expenditure is 29%of the pharmaceutical industrys revenue

128、 and 7%of the motor manufacturing industrys total revenue.Fig.3:UK R&D expenditure by product group(2022)and percentage of revenue spent onR&D19,20 billionSource:ONS,Oxford EconomicsPharmaceuticals52379100*Not possible to estimate R&D spend as a%of revenueMotor vehiclesand partsDefence*Chemicals and

129、chemical products6148%35302520151050R&D spend(left axis)R&D spend as a%of revenue(right axis)9.03.83.10.929%7%3%19Ensuring that the UK can capture the benefits of quantum computingImage courtesy of OQC20Ensuring that the UK can capture the benefits of quantum computing3.QUANTUM COMPUTING INTHE UKThi

130、s chapter investigates the firms in the quantum computing sector in the UK.We have chosen to split them into two segments.First,we discuss the firms operating in the UK whose sole activity(or a significant proportion of it)is in the quantum sector.These tend to be young and are all small and medium-

131、sized enterprises(SMEs).We then discuss large technology companies such as IBM or Google,where their quantum activities are only a small part of their UK operations.The split is in part intentional to reflect the different funding environments the two types of companies face.It is also a result of d

132、ata availability.We can use the information the firms who work solely(or mainly)in the quantum sector file at Companies House.It is more difficult for the large technology companies to accurately ascertain what proportion of their activity in the UK is in quantum computing.21 Crunchbase,“Quantum com

133、puting companies”,accessed October 2024.22 Employees on LinkedIn whose location was listed as being in the UK were identified.23 Department of Business and Trade,“Business population estimates for the UK and regions 2024:statistical release”,October 2024.3.1 CHARACTERISTICS OF QUANTUM COMPUTING FIRM

134、S OPERATING IN THE UKWe have investigated which firms are currently wholly or significantly focused on quantum computing in the UK and various of their characteristics for which information is readily available.Our analysis is based on a broader list of quantum firms compiled by Crunchbase.21 We hav

135、e cross referenced this with Companies House to ensure they were all registered as active in late October/November 2024.As firms file their accounts with Companies House with a considerable lag and on a consolidated basis,the employment data for the UK we discuss are drawn from LinkedIn and are accu

136、rate as of November 2024.22In November 2024,there were 52 firms operating in the UK working solely on quantum computing(Fig.4).It is therefore a very small industry,given there were 5.5 million private sector businesses in the UK at the start of 2024.23One potential implication of the small number o

137、f firms is that the sector has attracted relatively little research effort,which may inhibit understanding of the firms activities.The firms can be split into those working on hardware and software.There were 16 hardware firms focused on the development of the computers,and 36 software companies dev

138、eloping the programmes that will deliver the wide array of tasks and functions that make them useful.As the hardware is still in development,the software companies currently work on quantum simulators.The firms operating in the quantum computing industry are very young.As of November 2024,the median

139、 average age of a quantum hardware firm operating in the UK was five years old,whilst it was four years for quantum software firms.There were firms of less than a year old in both segments of the industry.A significant proportion are recent spin outs from UK universities(Fig.5).Fig.4:UK quantum comp

140、uting sector,quantum only firmsNumber of active firmsAge(years)Number of UK employeesYoungestMedianOldestTotalLowestMedianHighestHardware160510578116127Software3604273691591Source:Oxford Economics analysis of Companies House and LinkedIn21Ensuring that the UK can capture the benefits of quantum comp

141、uting24 Companies House,“Companies House accounts guidance”,accessed November 2024.All quantum hardware and software firms are SMEs as defined by employment size(Fig.6).This means they employ fewer than 250 people.Across both segments the majority are defined as micro(0-9 employees)or small(10 to 49

142、 employees).As a result of their size,the amount of financial information they are required to publish at Companies House is very limited.There are exemptions from publishing both balance sheet and profit and loss information based on size.24 This lack of publicly available financial information has

143、 been found to serve as a barrier to raising external finance.Fig.5:Origins of UK quantum only computing firmsFig.6:Distribution of quantum only firms by employment sizeSource:Oxford Economics,companies websitesNumber02025303540Quantum hardwareQuantum software51015UK university spin-outUK founded co

144、mpanyFounded outside UK63791611%Source:Linkedin;Oxford EconomicsMicro(fewerthan 10 employees30105070800Small(between 10 and 49 employees)Medium(between 50 and 249 employees)Large(greater than 250 employees)402060Quantum hardwareQuantum software386925253860022Ensuring that the UK can capture the bene

145、fits of quantum computing3.1.1 A deeper dive into quantum hardware firmsFigure 7 illustrates where in the public domain the technologies(referred to as“modality”in the jargon)are currently being developed by companies operating within the UK.This suggests that currently the hardware firms operating

146、in the UK are investing in multiple technologies.These include neutral atoms,photonics,superconducting,and trapped ions.Some firms do not publish information on the technology they are pursuing,possibly due to the sensitive nature of this sort of technology development.Fig.7:Quantum hardware compani

147、es in the UKName of firmYear incorporatedNo.of UK employeesModalityUK university spun out ofCountry of HQSubsidiary(not exhaustive)D-wave UK Ltd201911Quantum annnealingUSAUK&Japanlnfleqtion(ColdQuanta)37AtomUSAAustralia&UKORCA computing Ltd201958PhotonicUniversity of OxfordUKCanada&USAOxford lonics2

148、01953Trapped ionUniversity of OxfordUKUSAOxford Quantum Circuits Ltd2017127SuperconductingUniversity of OxfordUKJapanPasqal UK Ltd20214Neutral atomsFranceUKPsiQuantum Ltd201620PhotonicsBristol&ImperialUSAUKQontrol Ltd20208PhotonicsUKQoro Quantum Ltd20242Multi-nodeGermanyUKQuantinuum Ltd2014121Trappe

149、d ionUniversity of CambridgeUSAGermany&UKQuantum Brilliance20231Diamond quantumAustraliaUK,Singapore&GermanyQuantum Motion Technologies Ltd201760SiliconUCL&University of OxfordUKSpain&AustraliaQuEra Computing UK Ltd20233Neutral atomsUSAUKRigetti UK Ltd201611USAUK&AustraliaSeeqc UK Ltd20188Supercondu

150、ctingUSAUK&ItalyUniversal Quantum Ltd201854Trapped ionSussexUKGermanySource:Oxford Economics analysis of Company House accounts and LinkedIn23Ensuring that the UK can capture the benefits of quantum computingIt is argued that quantum hardware firms are higher risk than their software counterparts.Th

151、is is because it is not known which of the different technologies they are developing to create the qubits required to advance the capability of quantum computers will be successful,both technologically and commercially.In contrast,the software being developed are more likely to work across multiple

152、 hardware technologies.25 Founders Forum Group,“Innovation drivers”,202426 IBM,“Join the largest quantum community”,accessed November 2024.27 UK Research and Innovation,“UKRI National Quantum Computing Centre signs agreement with IBM”,November 2023.28 Phasecraft,“Phasecraft joins IBM Quantum Network

153、”March 2021.All but one of these 16 quantum hardware firms operating in the UK have an overseas presence.This move takes different forms:several have set up subsidiaries(e.g.Quantum Motion Technologies,Universal Quantum);while others have relocated their headquarters(PsiQuantum).Having an overseas p

154、resence is unusual for firms of this size in the rest of the economy.Themotives behind these moves are likely to be multiple.One of the main ones is likely to be access to funding.This enables them to shift their centre of gravity towards countries with better funding opportunities.3.2 LARGE TECHNOL

155、OGY FIRMS INVOLVEMENT IN QUANTUM COMPUTINGIn addition to the relatively small companies whose activities are more or less wholly related to quantum computing,there are a number of large technology companies who are also participating in the quantum computing ecosystem.Fig.8 lists some of these compa

156、nies,although the list is unlikely to be exhaustive.Only a small fraction of the workforce will be devoted to activities in quantum computing research.Many of these large technology companies play an important role in facilitating quantum research in the wider industry.Firstly,several large technolo

157、gy players are providing platforms from which users can run quantum computing applications.Examples include Amazon and AWS Bracket,IBM and the IBM Quantum Platform,and Microsofts Azure.By bringing companies together in this way and acting as“system integrators”,large technology companies can create

158、new revenue stream opportunities for smaller start-ups,helping them to finance their expansion.25 Moreover,through network and collaboration initiatives large technology companies can promote idea exchange across the ecosystem,helping to advance research in the field.Examples include IBMs Quantum Ne

159、twork which provides engagement and research collaboration opportunities for both academia and industry.26 UK members include the UK National Quantum Computing Centre(NQCC)and the UK-based quantum software company Phasecraft.27,2824Ensuring that the UK can capture the benefits of quantum computingFi

160、g.8:Large technology companies with involvement in quantum computing Company nameApprox.global employmentApprox.UK employmentCollaboration examplesAmazon Web Services(AWS)40,0005,500Amazon Braket provides access to quantum computers from D-Wave,lonQ,and RigettiAtos48,000140Atos has research collabor

161、ations with hardware company Pasqal and GENCI,the French national high-performance computing organizationFujitsu123,5277,000Research collaboration on qauntum with RIKEN,a Japanese nationa I research laboratoryGoogle182,5007,400Developing quantum computers and chips.Recent announcements include news

162、on Willow,their latest quantum computing chipIBM260,0007,300IBM provides the IBM Quantum Platform,providing access to a large fleet of 100+qubit systems on a commercial basis.IBM also provides Qiskit,the most-used SDK for developing quantum applications.All significant users of the IBM Quantum Platf

163、orm become members of the IBM Quantum NetworkIntel124,800470Collaboration with Arquit quantum in field of quantum communicationIonos4,364100(Ionos cloud)Consortium leader of the German governments quantum SeQuenC initiativeMicrosoft220,0005,500Microsoft Azure Quantum is a public cloud-based quantum

164、computing platform that offers quantum hardware,software,and solutions for developers to build quantum applications.Microsoft also collaborates with a number of quantum firms including with the quantum hardware firm QuantinuumSource:Company websites;Oxford Economics3.3 THE QUANTUM SECTORS SUPPLY BAS

165、E Outside of companies within the“quantum computing”sector there are numerous companies that supply the quantum sector.These include companies in the“quantum materials”sector that supplies critical specialised components for quantum computing.This includes technologies such as lasers,semiconductors,

166、and cryogenic systems.Our analysis of Crunchbase,Companies House,and LinkedIn suggests that there are 74 of these types of firms active in the UK,employing just over 5,000 people.However,many of these companies will not wholly supply the quantum computing sector but will sell into other sectors such

167、 as scientific research,automotive,and space.We have therefore omitted them from the analysis,although they will be partly captured as part of the quantum computing industrys supply chain in the economic impact analysis in Chapter 5.25Ensuring that the UK can capture the benefits of quantum computin

168、gImage courtesy of OQC26Ensuring that the UK can capture the benefits of quantum computing4.THE UK FUNDING LANDSCAPEThis chapter investigates the funding available to UK quantum firms from both the public and private sector.It analyses the rationale for public sector funding and contrasts the sums a

169、vailable in the UK versus other key competitor countries.29 Through the crucial MegaQuOp milestone and onwards to GigaQuOp and TeraQuOp capabilities.30 Deep tech is a generic term for technologies including Artificial Intelligence,robotics,blockchain,biotech,and quantum computing that are not focuse

170、d on end-user services.Deep tech provides technology solutions to challenges that require significant research and development.4.1 THE ECONOMIC IMPERATIVE FOR INVESTMENT IN QUANTUM COMPUTINGTo continue developing quantum computing technology to the point where it becomes useful to private and public

171、 sector customers will require significant R&D.29 Experts in the field estimate that the cost of developing a fully scaled quantum computer will costs hundreds of millions,if not billions of pounds.Investing in the scientists with specialised expertise and the capital equipment that are required to

172、undertake the research is expensive.One of the challenges firms in the quantum industry face is finding the finance to undertake the R&D to make the necessary technological advances.Sourcing funding for R&D on“deep tech”like quantum computing is always problematic.30 There are many perceived risks.O

173、nce the hurdle of developing a viable product or service is achieved,there may be issues with scalability and commercialisation.As a result,the timelines for investment are lengthy and uncertain.The risk is exacerbated as the quantum firms can usually offer little in the way of mitigation.Typically,

174、deep tech startups or SMEs have few tangible assets to offer as collateral and have yet to generate a cashflow to reduce the risk investors or lenders face.In the quantum sector,the problems of attracting funding to finance the necessary R&D is likely to be greater for hardware companies.One reason

175、is because they may be considered higher risk than their software counterparts due to the uncertainties about the technological and commercial viability of various emerging technologies.In contrast,quantum software technologies may be perceived as lower risk as they are likely to be able to operate

176、across multiple hardware platforms.However,over-reliance on a small number of software investments could also pose significant risks.The scale of the financing needs is also different across the two parts of the sector.Hardware firms need to raise larger sums than their software counterparts.This is

177、 because they must pay for capital equipment to undertake the R&D,with all quantum modalities requiring expensive specialised environments such as cryogenics.As well as having higher capital costs,hardware companies also incur substantially higher operating costs than software firms,with the costs o

178、f operating quantum hardware amounting to thousands of pounds an hour.27Ensuring that the UK can capture the benefits of quantum computing4.2 RATIONALE FOR GOVERNMENTS TO INVEST IN QUANTUM COMPUTING31 Department of Science,Innovation&Technology,“National quantum strategy”,March 2023.Quotation is fro

179、m page 9.As governments have limited resources and thus must make tough spending decisions,any government spending decision should have a strong accompanying economic rationale.There are several compelling reasons why governments should invest quantum technologies.4.2.1 National security argumentsTw

180、o of the major customer sectors of quantum computing are likely to be defence,and critical infrastructure(such as the NHS).Governments will want sovereignty over this type of technology to protect their national interest,rather than be reliant on a foreign provider.Not being reliant on a foreign pro

181、vider means governments are better protected from outside threats such as cyber-attacks or surveillance from foreign states.As it is uncertain which hardware technology will prove technologically and commercially successful,it is necessary that governments invest in quantum manufacturing capabilitie

182、s across multiple modalities.The UKs National Quantum Strategy acknowledges the security risks of not building domestic quantum capabilities with the Department for Science,Innovation and Technology commenting:“It is not in the UKs interests to rely purely on others for access to these critical tech

183、nologies”.31 There are also strategic reasons for constraints on investment in quantum from some adversarial countries through the National Security Investment Act and export controls.In recent years countries such as China,the US,Germany,France,and Italy have recognised the importance of quantum te

184、chnologies to national security.Many large-scale funding announcements for quantum technologies(see Section 4.4.2)have been made by defence departments.4.2.2 Leaving funding wholly to the private sector would result in large under-investmentTo illustrate this point we use the example of the space se

185、ctor.Funding of space activities began in the 1950s and were predominately led by government as the large costs and risks involved made the sector inaccessible to private actors.This large-scale funding of space activities led to technologies that had wider applications throughout the economy.Popula

186、rly cited examples include in the fields of energy(solar panels),communication(GPS technologies)and medicine(CAT scanners).We believe that the quantum computing sector shares strong similarities with the space sector.As well as the barriers to private sector funding due to funding scale and risk,the

187、 development of quantum computing is expected to benefit other industries with future applications ranging from medicine to financial services.In instances such as these where investments lead to wider societal benefits,private companies are likely to under-invest because they are not able to fully

188、realise the payoff from their investment.As such,there is rationale for government to provide funding so that the full societal benefits might be realised.A related point is that in order to encourage maximum levels of innovation,governments should encourage the existence of smaller firms in the ind

189、ustry.In markets without healthy levels of competition,incentives to innovate are reduced.As there are significant barriers to entry in the quantum market(for example,due to high startup costs)it is likely that without sufficient government support,a couple of large companies(who are more appealing

190、to private investors)will dominate.This will have the effect of reducing levels of investment and innovation in the overall industry.28Ensuring that the UK can capture the benefits of quantum computing4.3 UK GOVERNMENT FUNDING FOR QUANTUM COMPUTING32 UK National quantum technologies programme websit

191、e.33 Department for Science,Innovation and Technology.“National quantum strategy policy paper”,December 2023.34 Projects that started between 2021 and 2024 were isolated.Latest available data were used.UKRI,Innovate UK funded projects between 2004 and financial year 2023 to 2024,accessed October 202

192、4.In 2014,the UK government set up the National Quantum Technologies Programme(NQTP).32 At the time,it was the first of its kind,and has been widely copied by other countries governments.This was a 10-year programme which aimed to support research excellence in the quantum industry as a whole and to

193、 commercialise the best ideas to deliver economic and societal benefits to the UK.Across the decade the UK government invested 1 billion in the programme.The finance was spread across a wide range of recipients ranging from quantum hardware and software to applications such as quantum sensing and co

194、mmunication.The intention was to build a broad quantum ecosystem,rather than specialise in particular technologies or uses.The investment was spent on:214 million on research in four university-led Quantum Technology Hubs,to accelerate progress towards the development and commercialisation of quantu

195、m technologies across communications,sensors and timing,enhanced imaging,and computing.184 million to support universities and companies to work together to research and develop quantum technologies to develop new products and technologies.The funding was delivered by Innovate UK(and is discussed fu

196、rther below);93 million in the National Quantum Computing Centre to drive activities to build a scalable quantum computer in the UK;The Quantum Metrology Institute to provide a national capability in testing,evaluating,and accelerating the commercialisation of quantum technologies;A Quantum Technolo

197、gies for Fundamental Physics programme that aims to apply quantum technologies to investigate fundamental questions about the universe;Investments in graduate training to produce regular cohorts of highly qualified quantum researchers;and The Ministry of Defence has funded a number of Defence Scienc

198、e and Technology Laboratory programmes associated with the NQTP for research into defence applications of quantum.At the end of the first 10-year period,the Department for Science,Innovation&Technology announced the intention to invest a further 2.5 billion in quantum over the 10 years from 2024.Fol

199、lowing the publication of that intention in 2023,there was a change in government in July 2024.The current administration has committed to a multi-year Spending Review which will conclude in Spring 2025.It is unclear if the commitments made in 2023 will be met.The government has announced a number o

200、f funding commitments in 2024.It will invest 70 million on a programme of missions in quantum computing and positioning,navigation,and timing and a 100 million to continue to develop research hubs in quantum computing,communications,sensing,imaging,and timing.334.3.1 Innovate UK funding for quantum

201、computingOxford Economics isolated quantum related projects in Innovate UK-funded projects between 2021 and 2024 with categories assigned according to their classification on Crunchbase.34(Innovate UK is the governments innovation agency which aims to help companies develop new products and services

202、).Between 2021 and 2024,163 million was awarded to quantum related projects,of which 30 million(or 18%)was awarded to universities or the Science and Technologies Facilities Council(STFC).In the 29Ensuring that the UK can capture the benefits of quantum computingquantum computing sector specifically

203、 only hardware and software companies were identified as having won funding from Innovate UK.These awards total 53 million(33%)of total,with quantum hardware companies receiving 35 million of funding and quantum software 18 million of funding(Fig.9).This is a relatively low proportion of total,with

204、the remaining 80 million of funds being won by companies involved in the wider quantum ecosystem or in areas such as quantum communication or quantumsensing.Most Innovate UK awards to the quantum sector were relatively low value with median award values across the ecosystem ranging between 100,000 a

205、nd 210,000(Fig.10).While this level of funding is helpful for companies when they are starting up,as companies grow and enter later stages of product development they require much larger sums of funding.This is particularly true of the quantum hardware sector,which faces particularly large capital a

206、nd operating costs.However,its median funding award was only 159,000 in this time period,lower than that of the quantum software and communications sectors.High value awards over 1 million were a very small proportion of overall awards,with 81%of projects in the quantum computing and materials secto

207、r being under 1 million.Fig.9:Announced Innovate UK funding across the quantum ecosystem,2021-2024Fig.10:Median Innovate UK award value across the quantum ecosystem,2021-2024Quantum HardwareQuantum SoftwareQuantum MaterialsUniversity/ResearchCouncilQuantum SensingQuantum CommunicationOther Quantum R

208、elatedCompanySource:Innovate UK;Oxford Economics35,22%18,11%23,14%30,18%14,9%23,14%19,12%millions(thousands)Source:Innovate UK;Oxford EconomicsQuantumCommunication150502000100QuantumSoftwareQuantumHardwareUniversity/Research CouncilOther QuantumRelated CompanyQuantummaterialsQuantumSensing203,689182

209、,146159,343147,703119,871118,306108,84830Ensuring that the UK can capture the benefits of quantum computing4.4 OTHER MAJOR POWERS INVESTMENT IN QUANTUM COMPUTING35 National Science and Technology Council,“National Quantum Initiative supplement to the Presidents FY 2024 Budget”,December 2023.36 McKin

210、sey&Company,“Quantum technology monitor;April 2024”,2024.37 As previous footnote.38 European Commission,“Quantum technologies flagship”,accessed November 2024.39 USA:https:/www.usaspending.gov/;UK:https:/www.contractsfinder.service.gov.uk/Search;EU:https:/ted.europa.eu/en/;Australia:https:/www.tende

211、rs.gov.au/4.4.1 How public funding of quantum computing compares to elsewhere in the worldIt is important to compare the scale of the UK governments ambition in quantum technologies with that of the rest of the world.In recent years,other governments have significantly ramped up investment in their

212、own quantum research programmes.Since 2019,the US has more than doubled its spending under its National Quantum Initiative,with spending in 2024 expected to be over$900 million.35 Public funding for Quantum R&D in China is now at least$15 billion and European countries are also significantly ramping

213、 up their funding.36 Germanys 2023 commitment to spend an additional$2.25 billion on quantum technologies is over a much shorter,three-year time period than the UKs 2023 pledge to spend$3.1 billion over the next 10 years.37 Moreover,with the new UK government committing to a multi-year Spending Revi

214、ew in 2025,it is not currently clear this existing funding commitment will be met.When we contrast other countries approaches to funding quantum computing with that of the UK,we can see UK quantum businesses struggle with both a lack of certainty(future funding commitments have not yet been guarante

215、ed)and level of funding ambition.With Innovate UK contract values typically being between 100,000 and 200,000,businesses encounter a large amount of bureaucracy to receive relatively small funding values.Relative to its European counterparts,UK quantum firms are disadvantaged as a result of the Euro

216、pean Commissions decision to the exclude them from participating in its research funding programme,Horizon Europe,following Brexit.Since the beginning of 2024,UK companies and research institutions have been able to participate on the same terms as researchers within the EU and gain access to Horizo

217、n Europe funding.But quantum has been excluded in order to safeguard the Unions strategic assets,interests,autonomy,and security.This denies the opportunity for UK-based companies to bid for funding under the EUs Quantum Technologies Flagship programme,which has an expected EU budget of 1 billion be

218、tween 2018 and 2028.38 Exclusion from the programme also prevents UK quantum businesses innovating through partnership and collaboration with the research institutions and businesses which are involved in the programme.4.4.2 Public funding for quantum hardware For the quantum hardware sector specifi

219、cally,other governments are recognising the scale of funding required to develop this technology and are responding by making funding announcements in the tens or even hundreds of millions of dollars.Fig.11 illustrates the level of financing other governments are putting behind developing quantum ha

220、rdware technology through government initiatives and procurement agreements.Projects were identified through internet searches and validated using publicly available tender sites with the 10 largest value projects listed.39 All of these announcements have been made in the last three years,illustrati

221、ng the pace in which governments are increasing levels of support in the field.31Ensuring that the UK can capture the benefits of quantum computingFig.11:Top 10 funding announcements for specific quantum hardware projects GovernmentProject/Awarding BodyYearProject Description/Technology TypeFundingN

222、o.of companiesCompany name(s)Average funding per companyAustraliaDigital Transformation Agency2024n/a$725.0 m1IBM$725.0 mAustraliaFederal and Queensland Government2024n/a$617.0 m1Psi Quantum$617.0 mFranceProqcima2024Achieving fault tolerance.First phase ofthree$546.0 m5Alice&Bob,C12,Pasqal,Quandela

223、and Quobly$109.2 mGermanyPart of DLR Quantum Computing lntiative2022Ion tap$227.3 m5eleQtron,NXP Semiconductors Germany,Parity Quantum Computing Germany,QUDORA Technologies and Universal Quantum Deutschland$45.5 mJapanNational Institute of Advanced Industrial Science and Technology(AIST)2024Neutral-

224、atom type$41.0 m1QuEra$41.0 mCanadaStrategic Innovation Fund,Canada2023Photonics$40.0 m1Xanadu$40.0 mGermanyCyberagentur2024Ion tap$38.2 m3Oxford lonics,Infineon technologies$12.7 mGermanyGerman Aerospace Center(DLR2023Neutral-atom type$31.6 m1Planqc$31.6 mEUEuropean High-Performance Computing Joint

225、 Undertaking2024n/a$27.3 m1IQM$27.3 mUnited StatesPartnership with Air Force Research2022,2023Ion tap$22.5 m1lonQ and Psi Quantum(separate contracts)$22.5 mSource:Various governments websites;Oxford Economics32Ensuring that the UK can capture the benefits of quantum computing BUILDING A QUANTUM ECOS

226、YTEM IN ILLINOISTo illustrate the funding opportunities that exist abroad,we use the example of Illinois,where government investments at a federal and state level is helping to create a quantum ecosystem in the Chicago area.40 Chicago Quantum Exchange.“Illinois governor proposes$500M for quantum tec

227、hnologies in new budget”,accessed November 2024.41 The University of Chicago.“University of Chicago joins global partnerships to advance quantum computing”,accessed November 2024.42 The University of Chicago.“Startup to build massive quantum campus on Chicagos South Side”,accessed November 2024.43 Q

228、uantum Insider.“DARPA Plans To Establish Quantum-Testing Facility in Chicago with$140 Million Investment”,accessed November 2024.44 The University of Chicago.“Startup to build massive quantum campus on Chicagos South Side”,accessed November 2024.45 Illinois Public Radio.“Quantum business park coming

229、 to Chicago,backed by$700M from state of Illinois”,accessed November 2024.One of the first quantum funding announcements in the region was in 2018 when the Chicago area received$280 million in federal funding for four of the 10 National Quantum Initiative Act research centres.40 This scale of govern

230、ment funding into quantum research is likely to have helped lead to future large scale quantum computing collaborations.In 2023,IBM launched a$100 million initiative with the University of Tokyo and the University of Chicago to develop a quantum centric supercomputer.Google has also committed$50 mil

231、lion to a partnership with the same universities to support quantum research.41 Chicago is also home to the USs only accelerator programme solely aimed at early-stage quantum startups.Since 2021 Duality(aided by public funding)has hosted 15 startups that have secured more than$20 million in private

232、funding.42 In 2024,the Illinois state government committed$500 million in funding for a“quantum campus”in its FY 2025 state budget.Much of this funding will go to building the campus,which will include shared cryogenic facilities,equipment labs,and research spaces for both private companies and univ

233、ersities.The campus is projected to create thousands of jobs and generate up to$60 billion in economic impact.The Defense Advanced Projects Agency(DARPA)has announced it will establish a“new Quantum Proving Ground program”at the Illinois campus,where quantum computing prototypes will be tested.DARPA

234、 said it would commit up to$140 million of funding in this programme,with the state of Illinois using some of its$500 million budget to match these federal funds.43 Attracted by such funding,the quantum hardware firm PsiQuantum(a UK founded company spun out of the University of Bristol)announced it

235、was locating to the campus,bringing as many as 150 jobs.44 In addition to benefitting from the campus funding,PsiQuantum is also estimated to have received other business incentives from the state of Illinois worth$200 million.4533Ensuring that the UK can capture the benefits of quantum computingIn

236、comparison,the UK governments largest funding announcements for specific quantum hardware projects are relatively small.The largest announced awards were in 2023 when it was announced that under the UKs Quantum Testbed competition$37.6 million would be split between seven quantum hardware UK compani

237、es,leading to funding of approximately$5.6 million apiece.46 As illustrated in Fig.11,this is less than twice the funding per company than the top 10 public funding announcements made globally.It is also more than 10 times smaller than the likes of France and Australia whose governments have announc

238、ed hundreds of millions of dollars of funding to specific companies.It is evident that other governments are taking more ambitious approaches to support the development of quantum hardware technology with the UK governments approach appearing quite risk averse.This results in the UK having a signifi

239、cant funding gap relative to other countries.This funding gap is likely to have widened because of the impact of private sector investment:significant government funding through contracts with businesses provides a vote of confidence to private investors,and thus helps to“crowd in”privateinvestment.

240、46 Quantum Computing Report,“UK Government investing 45 million($56M USD)for 13 quantum projects in two different programs”,accessed November 202447 Mark Thompson,Keynote speech:“The special relationship:Why PsiQuantum came home from the US”,Bidwells,2024.48 Cambridge Quantum Computing Limited,“Annu

241、al report and financial statements for the year end 2021 for Cambridge Quantum Computing Limited”,2022.Many of the funding announcements listed provide additional benefits to quantum hardware firms.A number of the projects listed have long funding time scales which provide certainty to both business

242、es and investors and can help businesses put in place solid expansion plans.For example,the French governments Proqcima programme(worth$546 million)has a timescale of more than eight years,providing businesses meet development milestones.Moreover,having government act as customer through procurement

243、 agreements can be very beneficial in helping businesses refine and develop their product.We have already seen several of the UKs quantum hardware firms react to funding shortages in the UK.PsiQuantum(a spinout from the University of Bristol)moved to the US.Mark Thompson,its Chief Technologist and C

244、o-founder,explained the move:“We searched high and low for funding across UK,Europe,and the US.And we got by far the biggest response and the most traction in the US.And so in 2016,we raised a 13 million round seed fund.And all founders packed up their bags,packed up their families,and we all moved

245、to the west coast of the US and set the company up in the heart of Silicon Valley.”47However,it should be noted that although the company remains headquartered in the US,the company has subsequently set up a R&D facility in the UK due to Britains specialist experience in cryogenics.Another company,C

246、ambridge Quantum(a spinout from the University of Cambridge)merged with the US firm Honeywell Quantum Solutions to form Quantinuum in November 2021.Honeywell had been an investor and commercial partner of Cambridge Quantum since 2019.48Furthermore,a number of companies have set up subsidiaries to ta

247、ke advantage of better funding opportunities abroad.For example,Universal Quantum(a spinout from the University of Sussex)has formed a subsidiary in Hamburg in Germany.This is to enable it to bid for European grants where it has secured a 58 million contract from the German government to build a sca

248、lable trapped-ion quantum computer.Quantum Motion Technologies has also set up subsidiaries(for example in Spain)to take advantage of funding opportunities in Europe.34Ensuring that the UK can capture the benefits of quantum computing4.5 PRIVATE SECTOR FUNDING AND THE VALLEY OF DEATH FUNDING CHALLEN

249、GE49 British Business Bank,“British patient capital interim evaluation report”,February 2023.50 HM Treasury,“Financing growth in innovative firms:consultation responses”,November 2017.51 British Business Bank,“British patient capital interim evaluation report”,February 2023.In order for quantum firm

250、s to deliver transformative impacts across the economy,funding of both hardware and software firms is essential.As quantum firms develop,they will go through different funding stages,(from pre-seed to Series D),with amounts increasing as they scale from basic research and development to commercialis

251、ation and global expansion.Fig.12 lists some of the activities quantum firms typically undertake at each funding stage.Recent evidence suggests the firms that spin out of universities usually receive most of the seed funding from their university.The public sector also plays a significant role in fo

252、stering the initial stages through development grants.As quantum companies have grown,they have increasingly looked to the private sector to fund their development.Across other sectors,venture capital firms typically provide funding at early stages with private equity firms also likely to fund later

253、 stages.We now regard the state of financing in the UK for“innovative”firms more generally.Firstly,it is widely acknowledged that financial constraints mean that many UK companies are unable to scale up to their full potential.49 Given that the UK appears to excel at creating innovative start-up com

254、panies,it is apparent that it is failing to capitalise on these strengths.In a HM Treasury consultation entitled Financing growth in innovative firms,it is argued financing gaps are particularly acute for firms who have received initial investments(from Series B to D).50 Although organisations such

255、as the British Business Bank(BBB)are helping to improve this,businesses still face a funding gap relative to countries such as the US,and this gap is most acute at later funding stages.A key difficulty identified by the BBB is that UK venture capital funds are simply not large enough to make these l

256、ater stage investments(post series B).51Moreover,the nature of quantum technologies means that quantum firms and their investors face unique funding challenges.For firms the primary hurdles include the high costs of research,technical complexity,and long timelines required to achieve commercially vi

257、able quantum solutions.For investors,the risks are significant due to the nascent and uncertain nature of quantum technologies,where the timeline for returns on investment is unclear.A lack of information in other areas may also make investors hesitant to invest.Many quantum companies are very young

258、 which means investors do not have good information on past performance.In addition,as the field is evolving quickly,it is very difficult to predict which technologies or companies will emerge as market leaders.Fig.12:Description of firm activities by funding stagePre-seedSeries ASeries BSeries CSer

259、ies DExamples of firm activitiesForming initial team,basic algorithm development(software)Building and testing prototypesScaling operations,improving product capability and performanceScaling operations,launching pilot programmes with industry partnersLarge-scale commercialisation,global expansion,a

260、nd integration into wider systems to drive widespread adoptionSource:Oxford Economics35Ensuring that the UK can capture the benefits of quantum computingTo get a more detailed understanding of private sector funding of the industry,we have reviewed public funding announcements made by UK quantum har

261、dware and software firms.These figures should be treated with caution as many firms will not publicly disclose successful(and in particular failed or partially successful)funding appeals.Our review suggests that many UK firms are relatively early in their development stage.Only four UK-based hardwar

262、e firms and two software firms have announced funding beyond Series B.Fig.13 outlines publicly announced funding amounts for quantum hardware and software firms across different funding stages,from pre-seed to Series B.Whilst no pre-seed funding announcements for hardware firms were found,for softwa

263、re firms announced amounts at this stage are quite small with an average of$0.2 million and a maximum of$0.5 million.As both types of quantum firms progress along funding stages,the average amount raised increases.The funding announcements show that quantum hardware firms raise substantially more th

264、an software firms across funding stages,which reflects the higher costs they face to develop their product.Fig.13:Public funding announcements by UK quantum only hardware and software firms Quantum Hardware$millionsPre-seedSeries ASeries BMeanNo announcements found22.778.7Min1.622.4Max46.4110.0Quant

265、um Software$millionsPre-seedSeries ASeries BMean0.28.115.8Min0.02.21.4Max0.515.042.0Source:Company announcements;Oxford Economics36Ensuring that the UK can capture the benefits of quantum computing37Ensuring that the UK can capture the benefits of quantum computingImage courtesy of Universal Quantum

266、 Ltd38Ensuring that the UK can capture the benefits of quantum computing5.THE ECONOMIC IMPACT OF THE QUANTUM COMPUTING SECTORThis chapter analyses the economic contribution supported by the quantum computing industry itself.It does so by looking at the gross value added contribution to GDP and emplo

267、yment supported in the UK.Estimates are shown for 2023 and a point in the future when quantum computing technology is fully developed and widely adopted across the rest of the economy.The latter point has been conjectured to occur in 2055,but the precise date is not important.External reports,such a

268、s those from BCG,estimate that quantum computing could generate a global value of$450 billion to$850 billion over the next 15 to 30 years.52 The aim of this study is to provide a more granular projection of the growth and benefits of the quantum sector,focusing specifically on the UK.This chapter do

269、es not discuss the productivity benefits delivered to end user industries,which are presented in Chapter 6.52 BCG,“The long-term forecast for quantum computing still looks bright”,July 2024.53 ONS,“Non-financial business economy,UK:Sections A to S”,April 2024.54 Gross value added is the contribution

270、 each firm or sector makes to UK GDP.It is easiest thought of as the difference between the value a sectors output is sold for minus the cost of bought in inputs of goods and services that are purchased and used up in the production of that output.Gross Domestic Product(GDP)is the main measure of a

271、countrys economic output.It is the indicator used to compare the relative sizes of different countries economies and their rate of growth.55 ONS,“International comparisons of UK productivity(ICP),final estimates:2021”,January 2023.5.1 THE QUANTUM COMPUTING INDUSTRYS CURRENT ECONOMIC CONTRIBUTIONQuan

272、tum computing is a relatively new industry and is therefore not separately split out in existing statistical classifications.Therefore,in order to define the quantum computing sector for our economic analysis,we have identified the active companies in the UK that engage in quantum computing activiti

273、es,including quantum computing hardware,software,and computing services.All the figures presented in this section account for all three of these sectors.5.1.1 The current direct economic contribution of the quantum computing industry Our employment estimate is sourced from two inputs.The data on the

274、 individual quantum only firms employment in the UK is sourced from LinkedIn in November 2024.For the UK-based quantum staff of the large global technology firms,we have used insight provided by interviews with the quantum only and large technology firms themselves.In total,we estimate the industry

275、employed 1,052 people in the UK.Estimates of the quantum industrys contribution to GDP are based on measures of labour productivity(gross value added per head)sourced from comparable industries using ONS data.53 Based on this approach we estimate the quantum computing industry generated a 135 millio

276、n gross value added(GVA)contribution to UK GDP.54The average labour productivity of the sector(as measured by GVA per worker)was 128,020.This is 4.8%higher than the average productivity of a worker in the wider high-tech goods sector(Fig.14).The sector is also extremely productive when compared to t

277、he whole UK economy,where the UK average worker contributes 61,900.Having high productivity workers is important because it boosts the price competitiveness of UK products and enables workers to receive high wages,boosting the standard of living for the UKs residents.The existence of high productivi

278、ty industries in the UK also helps to address the UKs historic productivity gap with the other six G7 economies.5539Ensuring that the UK can capture the benefits of quantum computingFig.14:Gross value added per worker of quantum computing compared to other IT-related sectors and the whole economy in

279、 the UK56 5.1.2 Current multiplier impacts of the quantum computing industry56 Eurostat,“Glossary:High-tech classification of manufacturing industries-statistics explained”,accessed November 2024.The industrys impact in the UK extends beyond the contribution it makes directly through its own operati

280、ons.This is because,in conducting its operations in the UK,the industry procures a range of inputs of goods and services.Through this procurement spend on UK-made goods and services,the quantum computing industry stimulates further economic activity and employment at UK firms.This contribution along

281、 the UK supply chain of the industry is known as the indirect channel.We estimate the quantum computing sectors procurement supports a GDP contribution of 150 million and 2,100 jobs along its UK supply chain.While this indirect impact is spread across various UK industries,the largest indirect GVA c

282、ontribution for the hardware sector will be stimulated in the manufacturing sectors,notably from sub-sectors such as manufacturing of fabricated metal products,manufacturing of computers,and peripheral equipment and manufacturing of machinery.Other large contributions were supported in in the archit

283、ectural and engineering services sector and computer programming sector.The largest indirect GVA contribution for the software and services sectors will be stimulated in the computer programming and consultancy activities sector followed by accounting,bookkeeping,and auditing;legal activities;educat

284、ion and financial services and information service activities.Another impact to be considered is the induced channel.Quantum computing firms and their suppliers pay their staff wages which they spend at retail,leisure,and other outlets.These outlets produce goods and services drawing on their own su

285、pply chains.The economic activity and employment stimulated as a result of the wage payments is referred to as the induced channel.We estimate the induced contribution of the quantum computing sector to UK GDP is 150.6 million with 1,900 jobs supported.Source:ONS;Oxford Economics0Computers&ofce equi

286、pmentTelecommunication equipmentWhole economyElectronic components&boardsHigh-tech goods40,00080,000120,000160,000Consumer electronicsQuantum computing61,900122,000122,100122,300122,400123,100128,00040Ensuring that the UK can capture the benefits of quantum computing5.1.3 Current total impacts of th

287、e quantum computing industryCombining the three channelsdirect,indirect and inducedwe find that the quantum computing industry supported a total gross value added contribution to UK GDP of 435 million(Fig.15).The sectors gross value added multiplier is 3.2.This means for every 10 million in gross va

288、lue added generated by the sector itself,it supported a further 22 million around the rest of the UK economy through its expenditure.The quantum computing sector supported 5,100 people in employment across the UK.Of these only 21%were in the sector itself,with the rest supported in its supply chain

289、and through wage consumption impacts(Fig.16).The sector can therefore be said to have an employment multiplier of 4.6.This means for every 10 people employed in the quantum computing sector itself,another 36 were employed around the rest of the UK.Fig.15:Gross value added contribution to UK GDP supp

290、orted by the quantum computing industryFig.16:The employment supported by the quantum computing industrySource:Oxford Economics million0300350400450500DirectInduced50150250100200IndirectTotal13515015115115013531%share34%share35%share435Source:Oxford EconomicsPeople03,0004,0005,0006,000DirectInduced1

291、,0002,000IndirectTotal1,1002,1001,9001,1002,1001,90021%share42%share37%share5,10041Ensuring that the UK can capture the benefits of quantum computing5.2 THE QUANTUM COMPUTING INDUSTRYS FUTURE ECONOMIC CONTRIBUTION 57 Statista,Size of AI market in the US from 2020-2030,accessed November 2024.58 Einst

292、ein,M.and Franklin,J.,”Computer manufacturing enters a new era of growth”,1986.59 Eurostat,“Statistics explained;Glossary High-tech”,accessed November 2024.Forecasting the growth of new industries always presents significant challenges.This specifically applies to rapidly growing industries such as

293、quantum computing.The uncertainty surrounding the pace of technological breakthroughs,the amount of investment the industry will attract and how quickly it will be able to move from an R&D stage to a practical stage with a commercially viable product complicates the ability to provide accurate long-

294、term forecasts.Additionally,quantum computing has the potential to revolutionise various sectors but it is currently unclear how and when these advancements will be fully realised and when different industries will adopt quantum technologies.Therefore,to address these complexities and uncertainties,

295、we propose forecasting the quantum computing industrys growth in three distinct phases,drawing upon data from other technology revolutions that share similarities with quantum computings developmental trajectory.This phased approach allows us to build more reliable growth projections by leveraging h

296、istorical patterns from other technologies at different stages of their evolution.Phase 1:Scoping and R&D This is the phase quantum computing is currently in.During this phase,investment is directed towards research and development of the technology and the majority of the outcomes remain uncertain.

297、To forecast this phase,we have used data and forecasts on the growth of the artificial intelligence market in the US between 2020 and 2030.57 This is in order to reflect the growth of a rapidly evolving field which has made large technological breakthroughs.Phase 2:Quantum technology reaches maturit

298、y and becomes commercially viableThis phase focuses on the transition from R&D to practical technologies which can be utilised by end-user industries.To forecast this phase,we propose utilising the growth of mainframe computing systems between 1960 and 1971 to reflect a period when mainframes were t

299、ransitioned into fully operational systems used across various sectors.58 The challenge here lies in the uncertainty over how quickly quantum computing technologies will be adopted by industries compared to mainframe computing systems.To address this,we forecast this phase under multiple scenarios,c

300、onsidering varying rates of adoption.Scenario 1 represents our upper bound estimatesthis scenario assumes quantum computing grows at 75%of the rate of growth of mainframe computing systems.Scenario 2 represents our neutral estimatesthis scenario assumes quantum computing grows at 50%of the rate of g

301、rowth of mainframe computing systems.Scenario 3 represents our lower bound estimatesthis scenario assumes quantum computing grows at 25%of the rate of growth of mainframe computing systems.Phase 3:Industrys full-adoption of quantum computingThis phase reflects the stage at which quantum computing wo

302、uld have fully matured and have been adopted by all relevant industries.To forecast this phase,we reference the growth of high-tech goods output between 2013 and 2023.59 By analysing the growth of this sector in these relevant years,we can estimate how the quantum computing industry may stabilise on

303、ce it reaches a point where it is used across a variety of industries.42Ensuring that the UK can capture the benefits of quantum computing5.2.1 The future direct economic contribution of the quantum computing industry In previous sections,we estimated that in 2023 the direct contribution to UK GDP o

304、f the quantum computing industry was 135 million.This is projected to increase to between 1.8 billion and 60 Oxford Economics,Global Industry Service.Where the high-tech goods industry is defined to be Standard Industrial Classification 26 Manufacture of computer,electronic and optical products.3.9

305、billion by 2045(Fig.17).This is equivalent to 8%and 17%of the gross value added of the entire high-tech goods manufacturing sector in the same year,according to Oxford Economics forecasts.60 By 2055,the direct contribution to UK GDP of the quantum computing industry is expected to have increased to

306、between 2.1billion and 4.5 billion.The quantum computing industry is expected to directly create between 16,200 and 35,500 jobs by 2055.The growth trajectory of the employment generated by the industry is shown in Fig.18.Fig.17:Forecast of the direct contribution of the quantum computing industry to

307、 UK GDP between 2023 and 2055Fig.18:Forecast of the number of jobs created by the quantum computing industry in the UK between 2023 and 2055Gross Value Added(million)Source:Oxford Economics4,5005005,00004,000Scenario 1Scenario 2Scenario 320232034204520553,0003,5002,5001,5002,0001,0001357063,8732,818

308、1,7624,5483,3082,069Number of employeesSource:Oxford Economics35,00040,000030,000Scenario 1Scenario 2Scenario 3202320342045205520,00025,00015,0005,00010,0001,1005,50030,30022,00013,80035,50025,80016,20043Ensuring that the UK can capture the benefits of quantum computing5.2.2 Future multiplier impact

309、s of the quantum computing industryAs previously highlighted,the impact of the quantum computing industry is not limited to the operations of the industry itself and extends to the contribution along the UK supply chain of the industry(indirect channel)and the impact of wage payments throughout the

310、economy(induced channel).We estimate that the quantum computing sector will support a GDP contribution of between 1.8 billion and 3.9 billion through the indirect channel by 2055.The sector will also support a GDP contribution of 61 Oxford Economics.Macro.between 2.0 and 4.5 billion through the indu

311、ced channel by 2055.Similarly,we estimate that the quantum computing sector will support between approximately 25,400 and 55,800 jobs through the indirect channel by 2055.The sector will also support between 25,800 and 56,800 jobs through the induced channel by 2055.5.2.3 Future total impacts of the

312、 quantum computing industry We estimate the turnover of the quantum computing industry in 2023 to be 819 million.This is then expected to grow to up to 4.3 billion by 2034 under all three modelling scenarios.Under Scenario 1,the optimistic scenario,the turnover of the industry is expected to grow to

313、 20.6 billion by 2045 and 24.2 billion by 2055.Combining the three channelsdirect,indirect and inducedwe project that the quantum computing industry will support a total gross value added contribution to UK GDP between 5.9 billion and 12.9 billion by 2055(Fig.19).To give a sense of scale both equate

314、 to 0.1%of Oxford Economics current forecast for nominal GDP in 2055.61Fig.19:Forecast of the total contribution to UK GDP supported by the quantum computing industry between 2023 and 2055Gross Value Added(million)Source:Oxford Economics12,00014,000010,000Scenario 1Scenario 2Scenario 320232034204520

315、556,0008,0004,0002,0004352,29811,0258,0205,01512,9469,4185,88944Ensuring that the UK can capture the benefits of quantum computingThe sectors gross value added multiplier in 2055 is forecast to be 2.8.This means for every 10 million in gross value added generated by the sector itself,it is predicted

316、 to support a further 18 million around the rest of the UK economy associated with additional supplier purchase and wage consumption effects.Our modelling suggests that the quantum computing sector could support between 67,400 and 148,100 people in employment across the UK by 2055(Fig.20).Of these o

317、nly 24%will be in the sector itself,with the rest forecast to be supported in its supply chain and through wage consumption impacts.This is predicted to be between 0.2%and 0.3%of Oxford Economics current projection for total employment in the UK.In 2055,the sector is forecast to have an employment m

318、ultiplier of 4.2.This means for every 10 people projected to be employed in the quantum computing sector itself,another 32 are predicted to be employed around the rest of the UK.The greater projected scale of the employment multiplier relative to its gross value added counterpart reflects the expect

319、ation that the quantum sectors labour productivity will exceed that of the rest of the economy(as it does in 2023).Fig.20:Forecast of the total number of jobs supported by the quantum computing industry between 2023 and 2055Number of employeesSource:Oxford Economics140,000160,0000120,000Scenario 1Sc

320、enario 2Scenario 3202320342045205560,00080,00040,00020,000100,0005,10026,900126,100148,10091,70057,400107,70067,40045Ensuring that the UK can capture the benefits of quantum computingImage courtesy of OQC46Ensuring that the UK can capture the benefits of quantum computing6.THE ECONOMIC BENEFITS QUAN

321、TUM COMPUTING DELIVERS TO THE END USERSECTORSThis chapter estimates the productivity gains end user customers sectors will receive from the use of quantum computers in the future.These are both across the operational and R&D uses.It then goes on to qualitatively discuss the ongoing boost in discover

322、ies and innovation that will bring further economic benefits.6.1 ESTIMATING THE PRODUCTIVITY GAINS FROM QUANTUMCOMPUTERS62 Aghion,P.and Bunel,S.,“AI and growth:Where do we stand?”,San Francisco Fed,2024.Quantum computing is thought to have the potential to surpass the capabilities of classical compu

323、ters for key problems,inducing a significant technological shift across industries and the global and UK economies.The ability of quantum computers to manipulate all possible states of quantum particles could lead to breakthroughs in industries such as pharmaceuticals,renewable energy and financial

324、services(as discussed in Section 2.3).However,despite its vast potential,quantum computing is still in the early stages of development,making it difficult to predict exactly how it will impact the economy.However,it is expected to create significant productivity gains by making production and idea-d

325、evelopment faster and more efficient.Economic literature suggests one of the most effective ways to model the potential impacts of a new technology such as quantum computing is by drawing parallels with previous technological revolutions.Aghion and Bunel(2024)predict that productivity gains of moder

326、n technologies such as AI would be comparable to those of the digital technology wave of the late 1990s and early 2000s.We propose following a similar approach in order to model the potential impact of quantum computing on the productivity of different sectors.Our model uses data on the productivity

327、 growth in the US between 1997 and 2007 to mirror the methodology used by Aghion and Bunel(2024).62 The long-term impact of industries implementing quantum computing capabilities is expected to occur in threephases:Phase 1:technology developmentno industries have implemented any quantum computing ca

328、pabilities as the technology is still being developed,therefore,the industry productivity is expected to grow at the same rate as current forecasts.Phase 2:transitory productivity growthas the quantum computing technologies are fully developed,they can start being utilised by end user industries lea

329、ding to an increase in productivity growth.Phase 3:technology utilisationonce all relevant industries have adopted quantum computing the productivity gains will cease and the industries will continue growing at the same rate as current forecasts.According to interviews we conducted with various quan

330、tum computing companies,quantum computing is expected to start being useful to end user industries once it is fully developed in approximately 10 years.Therefore,we model the impact on user industries productivity starting from the year 2034(Fig.21).Similarly,the productivity gain is expected to cea

331、se once all industries have implemented quantum computing.We model the end of productivity gains from the year 2046.47Ensuring that the UK can capture the benefits of quantum computingHowever,if the UK were to achieve commercial viability of quantum technologies earlier than anticipated,the economic

332、 benefits would be realised significantly sooner.This is visualised by a scenario in which quantum computing technologies begin to be adopted by end-user industries as early as 2029(Fig.22).The main benefit of this accelerated timeline is that industries across the UK economy would experience enhanc

333、ed productivity and efficiency sooner as a consequence of the implemented quantum capabilities to drive innovation,optimise operations,and reduce costs.This would allow the UK to position itself as a key player in global quantum supply chains.The economy-wide productivity figures were then adjusted to reflect the specific impact that quantum computing adoption could have on specific industries.To