A precis of the response from a contact of mine in QinetiQ is as follows:
I don't believe that QinetiQ have developed a lightweight transponder, but QinetiQ did get involved in testing a "demonstrator" for the CAA to prove the concept.
The CAA was/is concerned about the usefulness of a low power transponder before they make it mandatory. The trials went well using the QinetiQ Harvard and a BAC1-11 target but it is suspected that it will be a few years before they are mandatedby the CAA. The kit they used was a one off and is a long way from being suitable for production and marketing.
The guess is that any manufacturer will combine it with other capability (eg GPS) and will make it a lot smaller than the unit tested. A big problem is likely to be where to position the aerial as the Harvard had several black spots even when the aerial was mounted on the airframe.
I will be in the presence of CAA SRG representatives on Thursday evening (a GA Safety evening), so will try to raise the subject there.
[Edited to correctly paste all relevant info]