This seasonal party season I’ve met two would-be London unicorns who spoke of the intense pressure they are under to move their potential £1 billion-plus tech businesses overseas. "Anywhere but Britain" was in effect what they were hearing, with the UAE, US and Saudi Arabia the most favoured destinations.
Why? Because in the case of the US, that is where the global financial power and digital know-how is concentrated, while the Gulf powerhouses are making major strides to attract global talent and introduce digital innovation.
What identifies them, and sets them apart from the UK and its European neighbours, is a can-do attitude. Anything is possible – they want it to happen and will make it so.
The start-up pair I know are focused on artificial intelligence. It's the same exploding growth sector as Rory Blundell, boss of Gravitee, who is reportedly house-hunting in Denver, Colorado. But not altogether willingly, it seems, because he only relocated to London five years ago.
Mr Blundell, who founded Gravitee in France a decade ago, has expanded the agentic AI company to 130 staff and raised $60 million in a funding round in May this year. Increasingly, though, the pull from the US is becoming stronger. "All of our investors, everybody, wants us to relocate to the US," he has said.
A study published in The Observer has confirmed this talent drain. The US and China are way ahead but very far apart in their development tracks. The Global AI Index found the UK trains world-class AI talent and attracts strong investment, but struggles to turn those into long-term companies and careers. That’s because foreign countries, mainly the US, offer easier access to three key start-up ingredients: capital, AI infrastructure and talent networks.
The UK ranks third in the world for computer education, behind the US and China – yet it is unable to hang on to the AI companies its entrepreneurial research graduates go on to create. The index found that Britain retains fewer than half of its best academic AI researchers, whereas the US keeps 80 per cent.
Another telling statistic is that UK AI firms attracted more than £2 billion ($2.6 billion) in private funding last year – about twice France’s (£1.1 billion) and five times Germany’s (£440 million) – but that still amounts to just 3 per cent of private investment in the US.
The funding is not as easily accessible in the UK and Europe, not to the same degree as it is elsewhere. When quizzed, AI founders list their priorities as finance, favourable tax treatment and a ready early market. After that come clearer and more predictable AI regulation, fast-track visas for top technical talent, procurement rules that make it easier for start-ups to sell into the public sector, and access to affordable, large-scale computing power.
This is where UK and Europe are losing and other fast-growing locations are winning. What is becoming apparent is that the AI world is coalescing around three centres: the US, UK-EU region and Gulf countries, particularly the UAE and Saudi Arabia.
Mind the gap
Of these, the one that is looking most vulnerable and may find itself slipping away is the UK-EU zone. Why? Because European countries and their leaders are applying what is often referred to euphemistically as an abundance of caution – they are talking big about investment and opportunities but, at the same time, they are paying heed to politicians and regulators anxious about controlling AI and restricting its development and impact.
Former UK prime minister Rishi Sunak was evangelical about the benefits of AI but his initiative also saw the establishment of the UK safety summit. Keir Starmer, his successor, has continued with the same emphasis on control alongside growth. Likewise, the EU is making trust and security a priority in the fast-evolving sphere.
It's not only in AI. The same approach applies in crypto and other digital technology. They are hidebound, fearful of going too far too soon – with the result they are not going very far at all and not quickly.
High energy prices are also having an effect. AI consumes an awful lot of power and that costs, even more if you are based in UK-EU region than in the US and the Gulf.
Differentials abound, such as scoring well in computer graduates. The top performer, streets ahead of anywhere else, is the US. About 130 of the world’s top institutions for computer studies are in the country, followed by China with 72, UK with 63, India with 51, Germany with 41, Spain with 40, down to Brazil, which has 24.
While the UAE and Saudi Arabia are investing substantially in their higher education institutions, this table could turn on its head. A major achievement for the Gulf states would be to match the larger student population centres, where universities are long-established and, in many cases, hugely well-funded (Stanford University is so far ahead of any other university in the number of AI start-ups it spawns as to be laughable).
But in a sense, this doesn’t matter so much. It’s a nice thing to have, of course it is, and is definitely worth pursuing. Where the Gulf nations have made their presence increasingly felt already is beyond that initial stage. Provision that matters later on includes exceptional working and residential facilities, infrastructure, excellent communication, ease of operation and capital. These are hungry for talent and AI entrepreneurs like that. They talk their language.
There is a feeling that the UK-EU region is relying on the past, on a cultural, educational tradition and reputation, but not engaging sufficiently with the future.
The competition for AI is global and has little time or interest for dwelling in the past. That is a tough pill for the UK and EU to swallow. Europe's early leaders must adapt faster or they run the very real risk of being left behind.
