Keep the government out of it.
If they really want a viable UK nanotech industry then I suggest they avoid any government involvement like the plauge.
I cannot think of a UK govenrment technical initiative since the 1950s which has led to any succesfull industrial application. (In fact its hard to think of a sentence with the words "Her Majesties Government" and "success" without the qualifing phrase "****ed up".
So boffins learn to go it alone, talk to a VC if you need money.