The UK tech industry is making remarkable progress through its advancements in AI and other emerging technologies. Based on the Tech Nation Report 2024, “UK Tech in the Age of AI”, the UK tech industry reached a market valuation of $1.1 trillion in Q1 2024. However, its increased growth has been primarily due to its investment in AI.
The UK now ranks first in Europe in AI funding, and £2.67bn was raised by UK AI startups in 2023. AI has shown its efficiency in business and economic growth, causing more UK startups to leverage it in their products. Moreover, Statista predicts the AI market will grow by 34% in 2024. In the first quarter of 2024, the Tech Nation report showed that 16% of total UK VC investment went to AI startups, marking its interest in emerging technology.
“The UK now has the opportunity to lead the responsible development of AI on a global scale”. Carolyn Dawson OBE, CEO of Founders Forum Group.
UK's AI Startups Defy Global Investment Trends
The UK has over 1,800 VC-backed AI startups and 20 AI unicorns. In 2023, UK AI startups saw a 10% increase in investment, $3.4 billion. However, this is the opposite of the global trend in which VC investments have declined. Global VC investment fell from $81.4 billion across 9,563 deals in Q2 ‘23 to $77.05 billion across 7,434 deals in Q3’23, according to a KPMG study. — A percentage decline has not been seen since Q4’16. However, the UK VC investment continues to grow, defying the trends seen in the global economy.
“The UK tech ecosystem is vibrant. We’re seeing a high level of new company creation, and the diversity of the sectors in which companies are being started and scaled is really positive.” Erin Platts, CEO of HSBC Innovation Banking UK.
AI Goes Beyond the Tech Industry
The impact of AI technology is seen across different industries beyond tech, including healthcare, finance, and retail. AI technologies are being leveraged for various applications, from pricing optimization in retail to improving patient outcomes in healthcare. For instance, Tesco has leveraged AI for pricing optimization. It has also reducing food waste by marking down items close to their sell-by date.
Healthcare companies like Babylon and BenevolentAI are using AI to improve patient outcomes and speed up drug discovery. The report shows that 83% of finance and fintech professionals see AI as having a positive impact on their industry.
Robert Armstrong, Director of Data Science at Tesco, "Generative AI is a novel and exciting type of AI that can create new content and ideas, opening new opportunities for our business and for our society as a whole."
What Regions Are AI Startups Thriving?
London is the main hub for AI startups, but other regions like Cambridge, Oxford, Edinburgh, and Manchester are also starting to emerge as hotspots. These cities are building tech communities and attracting big investment, contributing significantly to the digital technology sector.
Additionally, tech entrepreneurship is booming across the UK, with investment growth in the West Midlands, Glasgow, and Northern Ireland. Over the last five years, Birmingham, Liverpool, Sheffield, Glasgow, and Belfast have become tech hubs in their own right and are really growing and innovating. Birmingham grew by 1183%, Liverpool by 657%, and Sheffield 595%. These regions are becoming increasingly important to watch in the UK’s tech ecosystem.
“There’s a plethora of capital for Seed Stage companies. Funds are more active versus less active, and there’s more entrepreneurship versus less.”- Hussein Kanji, Hoxton Ventures
The Future of AI in the Tech Industry
The UK tech industry is facing two major issues in the growth of AI; the need for more diverse talent and funding. However there are significant efforts being made to address these issues. The UK has committed over $125 million to address the challenges in AI growth while initiatives like the Libra programme for underrepresented tech founders and the Rising Stars competition are developed to support early-stage startups.
Looking forward, the UK is set to continue to lead in AI innovation. The launch of the UK AI Safety Summit and other entrepreneurship academies, will help create future tech leaders. The growing positivity towards AI among UK tech professionals supports this trend. According to the report, 69% of tech professionals think AI will have a transformative impact on the UK economy in the next few years.
With continued investment, responsible development, and a focus on inclusivity, the UK is well-positioned to reach its full potential of AI, driving economic growth and societal benefits.
