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

Quantum Computing

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

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

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

Developments in the UK

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

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

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

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

Developments in the US

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

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

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

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

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

Collaboration Among the US and the UK

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

How the UK and US Stack Up

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

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

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Photo of Nigel Howard Nigel Howard

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

For over 30 years Nigel Howard has specialized in technology transactions such as M&A, strategic alliances, licensing, distribution agreements and outsourcing. Clients range from start-ups and emerging companies to international corporations. He has led negotiations of billion dollar service agreements that were critical to his client, and successfully handled the intellectual property and data issues on over 250 venture capital and M&A transactions.

Nigel is a “tremendous attorney” singled out for his detail-oriented approach, according to clients interviewed by Chambers and Partners. Peer commentators note his admirable commercial awareness, which achieves business-focused results, often in the most challenging of circumstances. He uses his extensive experience with IP and technology to advise on the commercial imperatives underlying these agreements.

Nigel has been ranked by Chambers Global, Chambers USA, Legal 500, Best Lawyers in America, and Who’s Who in American Law. He is frequent speaker on AI, data, distribution, and technology legal issues. His past and current clients include American Airlines, the American Bankers Association, American Express, AstraZeneca, British Airways, Brown Brothers Harriman, Cathay Pacific, Cisco, CoBank, DoubleClick, Etihad, HPE, Farelogix, Iberia, Mars, Merck, Merrill Lynch, Microsoft, NCR, the NFL, Novartis, P&G, Philippine Airlines, Promontory Financial, Singapore Airlines, Teva, TouchTunes, UBS, and Wyeth.

Photo of Matthew Shapanka Matthew Shapanka

Matthew Shapanka practices at the intersection of law, policy, and politics, advising clients on important legislative, regulatory and enforcement matters before Congress, state legislatures, and government agencies that present significant legal, political, and business opportunities and risks.

Drawing on more than 15 years…

Matthew Shapanka practices at the intersection of law, policy, and politics, advising clients on important legislative, regulatory and enforcement matters before Congress, state legislatures, and government agencies that present significant legal, political, and business opportunities and risks.

Drawing on more than 15 years of experience on Capitol Hill, private practice, state government, and political campaigns, Matt develops and executes complex, multifaceted public policy initiatives for clients seeking actions by Congress, state legislatures, and federal and state government agencies. He regularly counsels businesses—especially technology companies—on matters involving intellectual property, national security, and regulation of critical and emerging technologies like artificial intelligence and autonomous vehicles.

Matt rejoined Covington after serving as Chief Counsel for the U.S. Senate Committee on Rules and Administration, where he advised Chairwoman Amy Klobuchar (D-MN) on all legal, policy, and oversight matters before the Committee, particularly federal election and campaign finance law, Federal Election Commission nominations, and oversight of the legislative branch, including U.S. Capitol security after the January 6, 2021 attack and the rules and procedures governing the Senate. Most significantly, Matt led the Committee’s staff work on the Electoral Count Reform Act – a landmark bipartisan law that updates the procedures for certifying and counting votes in presidential elections—and the Committee’s joint bipartisan investigation (with the Homeland Security Committee) into the security planning and response to the January 6th attack.

Both in Congress and at Covington, Matt has prepared dozens of corporate and nonprofit executives, academics, government officials, and presidential nominees for testimony at congressional committee hearings and depositions. He is a skilled legislative drafter who has composed dozens of bills and amendments introduced in Congress and state legislatures, including several that have been enacted into law across multiple policy areas. Matt also leads the firm’s state policy practice, advising clients on complex multistate legislative and regulatory policy matters and managing state advocacy efforts.

In addition to his policy work, Matt advises and represents clients on the full range of political law compliance and enforcement matters involving federal election, campaign finance, lobbying, and government ethics laws, the Securities and Exchange Commission’s “Pay-to-Play” rule, and the election and political laws of states and municipalities across the country.

Before law school, Matt served in the administration of former Governor Deval Patrick (D-MA) as a research analyst in the Massachusetts Recovery & Reinvestment Office, where he worked on policy, communications, and compliance matters for federal economic recovery funding awarded to the state. He has also staffed federal, state, and local political candidates in Massachusetts and New Hampshire.

Photo of Adrian Lev Adrian Lev

Adrian Lev is an associate in the firm’s New York office and a member of the Technology and IP Transactions Practice Group.

Adrian focuses on a variety of commercial transactions involving technology, intellectual property, and data. He advises clients on issues relating to…

Adrian Lev is an associate in the firm’s New York office and a member of the Technology and IP Transactions Practice Group.

Adrian focuses on a variety of commercial transactions involving technology, intellectual property, and data. He advises clients on issues relating to IP and data licensing, software development, data commercialization, and information technology services. He represents clients in a wide array of industries, including cloud computing and the airline industry.

Adrian recently completed a successful secondment at one of the largest cloud computing companies in the world, advising in particular on transactions in Latin America.

As a native Spanish speaker, Adrian has a broad pro bono practice advising monolingual Spanish-speaking clients with immigration petitions and housing disputes. He also advises nonprofit organizations and emerging artists in relation with their commercial, IP and data needs.

Tamzin Bond

Tamzin Bond is a Trainee Solicitor who attended BPP School of Law. Prior to joining the firm, Tamzin completed her Ph.D in Chemistry from Imperial College London.