UK start-ups are “losing faith” in the government as a technology champion after successive efforts to buy more from domestic businesses have had little effect, according to a new report from the Startup Coalition, which says Andy Burnham’s “Buy British” push must address fundamental problems in the procurement process.

The lobby group, which represents technology start-ups and scale-ups, said: “For British start-ups and scale-ups, this really is the last-chance saloon after successive administrations have delivered warm words but little real action. The result is an ecosystem increasingly losing faith in the UK government as a buyer and champion.”

Successive governments over the past decade have struggled to increase the share of government spending that goes to small businesses. In 2015 David Cameron set a target for one third of central government procurement to go to small and medium-sized enterprises by 2020. The latest estimates from Tussell and the British Chambers of Commerce suggest that 21 per cent went to SMEs last year, a six-year high.

In the technology sector the picture is more concentrated. Tussell found that 84 per cent of UK government tech spending last year went to only 150 businesses, of which the majority were foreign.

Concern about the UK’s reliance on foreign technology, set against an increasingly fractious geopolitical environment, has added urgency to efforts to support domestic alternatives.

In his first speech as prime minister, outside Downing Street on 20 July, Burnham said he would “use public procurement to back British industry”. John Healey, the chancellor, said the government would “buy British not if possible, but by design” in sectors such as technology, defence and artificial intelligence.

The government has already made changes to the “social value” rules used to assess bidders for public contracts. The Cabinet Office has doubled the credit given to companies whose bids provide “social value” through local employment, scrapped rewards for net zero and diversity, and raised the threshold at which social value criteria apply to £1 million, from £139,688 previously.

The Startup Coalition said the early changes on social value could “mark a potential turning tide”, but warned that ministers would need to reshape the procurement process itself.

“Warm words from the top will not be enough to turn a tanker that is inert, risk-averse and slow to seize new opportunities. Instead, systematic change must be made at every point in the public sector buying process to turn strong signals into real change founders can feel,” the group said.

The report found that start-ups faced challenges at every stage of the procurement process, including risk aversion among buyers, lengthy delays and difficulty getting in front of the right people.

“We often spend more time stuck in procurement for public-sector contracts than delivering them,” said Jack Perschke, co-founder and chief executive of Great Wave AI, a business that helps customers build artificial intelligence agents.

Start-ups also argue that they are placed at a disadvantage by framework agreements, the long-term purchasing arrangements through which 26 per cent of public procurement is agreed. The frameworks open only every few years, often carry onerous requirements to bid and can leave companies facing delays while waiting for approval.

“All too often, processes and bureaucracy act as barriers for SMEs,” said Rachael Crook, chief executive and co-founder of Lifted, a health and care platform.

In a statement, the government said it was “committed to making sure every pound of taxpayer money is delivering real benefits for communities, developing skills and creating new jobs in every part of the country”.

It added: “These changes will cut red tape and ensure that every business focuses on delivering British jobs. Our priority is good growth in every postcode and we’re using £90 billion of public contracts to make sure that happens.”

Amy Ingham

Amy Ingham is a reporter at Business Matters, covering UK business news with a focus on breaking news, business policy, late payments and insolvency. She joined the magazine in 2026 after completing the NCTJ Diploma in Journalism at Harlow College’s journalism school. Her recent reporting includes British Steel’s nationalisation and its impact on SME suppliers, the decline in late payments by large firms, and Insolvency Service director disqualifications. Reach her at aingham@cbmeg.co.uk.

Anthropic could be valued at more than $2 trillion when it lists on the New York Stock Exchange this autumn, a level that would make the Claude developer’s flotation the largest in history, according to the Financial Times.

The artificial intelligence company filed to list in June and the float is expected in September or October. Senior executives have not yet set a target price, the FT reported.

A valuation above $2 trillion would carry Anthropic past SpaceX, which became a public company in June at a value of $1.75 trillion. Investors believe Anthropic’s lead in model capability, together with the speed at which businesses have adopted its tools, justifies the valuation, the FT reported.

The company’s annual recurring revenue, its preferred metric, which extrapolates a full-year figure from a single month’s performance, is expected to reach $100 billion to $120 billion by the end of the year. That compares with $48 billion in May and $9 billion at the start of the year.

Co-founded in 2021 by its chief executive, Dario Amodei, Anthropic secured a valuation of $965 billion in May, making it more valuable than the ChatGPT maker OpenAI. Its models have overtaken OpenAI’s among business users this year.

The run-up to the float has not been smooth. Anthropic this year became the first American company to be designated a supply chain risk by the US government, a ruling that restricts federal agencies and defence contractors from using its models. The company is challenging the designation.

Competition intensifies

Competitive pressure has also increased. Moonshot, a Chinese AI start-up, released its Kimi K3 model last month, which performed on a par with Anthropic’s models on many tasks at a fraction of the cost.

OpenAI has cut the price of its models, leading Anthropic to drop planned price increases for its own.

Azeem Azhar, founder of the research group Exponential View, said some of Anthropic’s recent actions had felt “reactive rather than strategic”.

“Its decision not to raise prices on models like Sonnet felt reactive given the market pressures. It’s facing all this competition from cheaper open-source models, as well as OpenAI’s own price cuts,” he said.

‘Cracks in the AI thesis’

Data from Ramp, a payments company that tracks corporate spending on AI, suggests Anthropic’s market share among US businesses has continued to grow, but that corporate adoption of Fable 5, its most expensive model, has been slow.

According to Ramp, Fable 5 made up only 6 per cent of the tokens businesses purchased from Anthropic over the past month. Despite being Anthropic’s most expensive model by far, it accounted for only 11.4 per cent of spending on the company’s models.

Ara Kharazian, lead economist at Ramp, said the data pointed to “cracks in the AI thesis”.

“With Fable 5, we’ve found a new upper bound for how much businesses are willing to spend on AI,” he said. “More performance is not worth the price tag.”

Azhar said Ramp’s data suggested that many businesses were struggling to identify clear use cases for the most powerful models.

“This technology has evolved faster than the capacity of customers to make sense of it,” he said. “Fable is expensive, but it’s also very powerful, which makes it hard to use. Ordinary companies cannot guarantee that if they’re spending $10 on a million tokens, then they’re getting $11 back. The business case is harder to make.”