UK Depends on Foreign Investment for AI, Hindering Scale

A dependence on foreign capital in the United Kingdom for investments into artificial intelligence will stymie British technological progress, a parliamentary committee heard Tuesday.

See Also: Does Office 365 Deliver The Email Security and Resilience Enterprises Need?

Speaking to the Communications and Digital Committee on the challenges to scaling AI businesses in the country, Erin Platts, CEO at HSBC Innovation Banking, said around 70% of the investments in the U.K. tech sector come from overseas. Of that, nearly 42% is from the United States. What the U.K. currently lacks is a “depth of capital,” she said.

“AI is one of the most exciting game-changing sub-sectors for us. But we’ll need to think about, how you unlock domestic capital so that everyone, inclusively, can enjoy the hopefully, the returns and the upside that comes,” Platts said while speaking at the Tuesday committee inquiry.

The absence of capital has made it difficult for British businesses to scale operations, said Michael Holmes, CEO at Scale Space, a venture investor.

“The general sentiment is that U.K.-based VCs are perhaps more risk averse than the U.S. VCs. And therefore, for a scaling business based in the U.K. they’re going to kind of go to where the money is, and they, frankly don’t care whether it’s U.K. or U.S. capital. They just need to survive,” Holmes, said.

While James Wise, partner at Balderton Capital, despite British venture-backed AI companies raising only 10% of their U.S. counterpart this year, the country’s AI market is continuing to grow steadily.

The current U.K. AI market is worth $92 billion, according to a research company. Tech industry body TechUK estimates AI can boost the U.K’s gross domestic product up to 10.3% by 2030. The newly-elected U.K. Labour government views AI as a driver for innovative growth in the country.

A solution to address the issue of capital and scaling challenges is to bring more international talents, which can play a pivotal role in helping the U.K. government to boost its AI market, Platts added.

“While there are gaps locally, whether it be capital or talent, I think there is opportunity to aggressively bring in talent, innovative companies that will foster amazing domestic growth,” Platts said.

During the Tuesday hearing, lawmakers raised concerns about the acquisitions of British AI companies by U.S. tech giants but Wise said they shouldn’t be viewed with skepticism.

“Many of those companies are investing here, and those companies invest here. So by having some of those companies open up offices here and invest in research here that benefits our spillovers to the local U.K. economy,” Wise said.

Alex Kendall, CEO of autonomous driving start-up Wayve, said there is an AI talent gap mainly because the U.K. lacks an ecosystem similar to Silicon Valley, where large companies produce leaders, who can mentor the next generation of leaders and companies.

“I think being able to bring this kind of talent to the U.K. is what would really help produce some amazing companies. Then those companies can not only produce the ecosystem returns, whether that’s capital that can be reinvested, or those companies themselves can help invest and support the next generation of businesses,” Kendall said.