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Tech & Digitalisation

The UK Must Embrace AI to Build the Giants of Tomorrow's Global Economy


Commentary26th October 2023

Over the past year, breakthroughs by the American startup OpenAI have unleashed a new era of innovation in artificial intelligence (AI). Backed by Microsoft, a company that drove the first wave of the technological revolution, this new era demonstrates the virtuous cycle of capital, talent and technology that has created the momentum behind economic success in the United States.

The United Kingdom, as the home of DeepMind and other leading AI companies, is not far behind on the technological frontier. But there is still much more the country should do to build an ecosystem that will drive the next wave of superstar companies. Given the pace at which this technology is developing, the UK is heavily focused on safety. But this cannot come at the expense of innovation. The country must build tomorrow’s giants of the world economy.

AI is likely to be the definitive technology of the century, disrupting and reforming the world around us. From generative AI through to biotech, clean tech, education and much more, this technology will drive economic growth, transform scientific discovery and even help reimagine government itself. The opportunity is vast for the UK and its sluggish economy: AI has the potential to add £400 billion in economic value by 2030.

This year, almost every country has woken up to the strategic value of this technology – and how the pace at which they adopt and adapt to this new world will determine their future. It means the decisions made in the UK today will be some of the most consequential for the country’s trajectory.

If the government sets the right course now, inspiring a new generation of talent to form companies and enabling startups to scale, it can better shape the country’s future, both at home and abroad. If not, the technological superpowers that dominate today will continue to hold the advantage tomorrow.

The need for a new technological consensus is why the Tony Blair Institute for Global Change (TBI) has collaborated with the Startup Coalition and Onward to deliver the AI Project, whose new report launches today. We share the view that whatever is in store for the UK’s future with AI, the country will only be successful if it harnesses the immense potential of its AI startups.

In many ways, there is reason for optimism. Beyond DeepMind and companies such as Faculty, the UK has nearly 50 startups involved in cutting-edge generative-AI technology, including Stability AI, Ultraleap and Synthesia. The country also has hugely promising firms in biotech – such as Exscientia and Isomorphic Labs – defence, enterprise and much more. Over the past ten years, the number of AI startups has grown from just 200 to more than 1,700, producing more than £2 billion in gross revenue. They are estimated to employ almost 38,000 people.

But to build on this early promise, there is much more that must be done.

First, the government must help expand access to capital. The UK is high in the ranking of global technology investment, but the US is far ahead and European countries are making significant gains. Paris-based Mistral AI’s recent $113 million initial funding round was the largest-ever seed round in Europe. Untapped investment potential in the UK pension market could increase capital pools, underlining the importance of reforming pension funds as outlined in the Mansion House reforms. But the UK also needs to build on the success of initiatives such as the Enterprise Investment Scheme and Seed Enterprise Investment Scheme to make sure they keep up with the pace of AI.

Second, British businesses must have better access to talent. Silicon Valley is seeing a new flourishing around AI with a new “Cerebral Valley” cluster developing. Part of the United Kingdom’s competitive challenge centres on culture and community, another on the hard economics of salary, while still another relates to policy issues – such as visas – that hold the industry back.

The government must also help industry access compute. At the moment, AI development requires access to vast amounts of compute, and the cost can be a cripplingly expensive drain on startups’ limited resources. Software specialist NVIDIA has become one of the most vital companies of the modern world, with an eight-month backlog on its graphics processing units. The UK needs to build its capabilities while partnering with the cloud giants to ensure better public-private access.

Finally, leaders in the field and in government must work together to improve regulation. The United Kingdom has taken the lead on safety, with novel and innovative approaches such as Ian Hogarth’s taskforce and the AI Safety Summit. This work has a narrow and specific focus on frontier risk that, while necessary, should not be seen as an impetus for overregulation or lack of focus in other areas. For example, regulatory sandboxes could be key enablers of innovation that can boost cooperation between regulators and industry. Yet the 12-month timeline to implement critical action points of the UK government’s white paper on AI is already regarded as too slow.

As AI opens up new possibilities, one thing is clear: the UK can and should be a leader in this new world. The complexity and speed of AI development requires radical thinking on how the state itself operates, but doesn’t negate the need to ensure that the tried and tested basics are still in place.

Across capital, talent, compute and compliance, we have yet to really nail the fundamentals: accessing capital throughout the lifecycle, competing on compute and data infrastructure internationally, hiring the best and brightest talent possible, and navigating the regulatory environment. There is so much more to do, and it needs to be done now.

This commentary marks the publication of The UK's AI Startup Roadmap, a new report from the Startup Coalition, Onward and TBI's joint AI Project.

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