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Currently, two controversial tribes are debating the UK’s technology outlook. Call them fullley and sky, depending on whether you consider the glass half full or half.
Fullies considers the UK home to three of the top 10 global universities, the third-established startup ecosystem after the US and China, the world’s third-established startup ecosystem, and Europe’s largest venture capital pool (currently there are more VC companies in London than manager sandwich shops). From the spinning of fintech pioneers to autonomous driving software company Wayve, to Google Deepmind’s biotech spinout and Isomorphic Labs, a new generation of highly ambitious startups are ready to jump into the global stage.
However, the emergence of the sky highlights the recent slowdown in emerging investments and the widening of the cracks between the UK and Silicon Valley, which has been injected into AI. Dealroom’s latest data finds that the UK startup raised just £16.2 billion in 2024, the lowest total since 2020. In contrast, investment in Silicon Valley startups rose 71% last year to £650 billion. It’s no wonder so many UK startups seem to move to the US and list them instead of staying at home.
UK startups have the disappointment that the labour government hasn’t run any more energetically on the entrepreneurial agenda. When Labour was elected last year, they hoped that the UK government would eventually break out of the less productive trap and move beyond conservative stabilization to Brexit.
To be fair, the government has taken several encouraging measures to promote the AI sector. It also leaned into the pension fund industry to mobilize more growth capital. However, these microreforms are hidden by the Macroglome, which is attributed to the government’s decision to increase taxes on employment by increasing employers’ national insurance contributions. Worse, the government has reduced the tax credits offered to successful entrepreneurs and non-territories (including many angel investors). For many, workers seem to be more obsessed with the redistribution of wealth than the creation of wealth. According to many entrepreneurs, what is needed is a “shift in atmosphere.”
One attempt to promote a more imaginative progression agenda came with the launch of the UK Centre for Progress. (Starting a think tank is a very British response to political challenges, but it could still be helpful if we could sharpen our policies).
Kanishka Narayan, a Labour MP and former VC investor, tells me, “There is no path to fairness that does not exist through prosperity.” He suggests that the country’s focus should be on ideas, talent and capital. How to build an R&D system that provides tangible results? How can you attract the best people in the world to work in the UK? How can you mobilize more investments?
Below are three tentative answers to these questions: First, President Donald Trump poachs talented American university researchers and entrepreneurs who are busy destroying the country’s innovation machines. Thousands of foreign technology workers in the United States now have to worry and check their visa status. Top of the UK target list should be experienced operations managers who know how to turn promising startups into global businesses. “Everything that’s happening in the US is a great opportunity for Europe,” said Check Warner, co-founding partner at VC company ADA Ventures. “This is a moment that attracts incredible people to the ecosystem here.”
Second, the UK needs to develop closer connections with other second-tier technical capabilities to exploit the possibilities of AI. According to Stanford University’s rankings, after the US and China, the five most vibrant AI countries in the world are the UK, India, the United Arab Emirates, France, France, France, France, France, and South Korea. All five countries were able to find common interest in creating joint technology visa regimes, pooling capital to invest in start-ups, and promoting a sensible global regulatory framework. The Five Eyes Intelligence community is not as good as five AIS.
Third, we will create new patriotic investment vehicles (growth capital ISAs) to help start-ups save more domestic retailers. Many pension fund managers seem too cautious (or hidden by regulations) to invest a portion of their assets in VC funds. However, the popularity of crowdfunding sites that help guide private savings to startups shows that there is a desire to support homemade success stories. The government should encourage younger generations to do so.
The easiest way to ensure that British fly releases win the sky is to pour more wine into the glass.
john.thornhill@ft.com
