The ‘golden triangle’ of London, Oxford and Cambridge is a significant driver of UK economic activity and holds a dominant position in the European AI community. The relationship between the UK’s world-leading universities and industrial developers in the technology has been critical to the growth and success of the UK’s AI sector so far.

Industry experts point to the success of early London-based AI companies such as DeepMind as contributing to a natural acceleration: successful companies pull in others of equal ambition and benefit from a critical mass of AI talent. Moreover, our contributors said tax incentives and the ease of setting up in the UK have played a key role in encouraging visitors to set up here after their studies.

‘Tractable’s founders very much came out of the body of machine learning expertise built within UK universities. They created a company in London as it’s actually a great place to start a business. There’s access to investors, a very strong ecosystem, and a supportive research and development tax scheme which is extremely important to AI. It’s an open city that attracts talented people from all over the world.’

Norval Scott, Tractable

‘There are many incentives for someone to move to the UK to start their business. Capital definitely plays a part: securing financial backing is a major step, and investors who back and understand deep tech are few and far between. The UK has built an increasingly solid track record here, with investors like Amadeus Capital, IQ Capital LocalGlobe, Crane VC, Luminous Ventures, and others paving the way forward. Talent is probably the most important aspect though, both in terms of those with technical expertise, but also those with a commercial understand of how one sells a deep tech product: finding people at the cutting-edge of what they do is especially challenging. You need to go where you can to find talented employees and the UK has a strength here with world-leading universities across the country and globally competitive research.’

Harry Rhys Davies, TechNation

AI is still relatively young. The lack of scale-up companies can be explained in part by the maturity of the market, while progress has happened more quickly when AI has been applied to some sectors than others. However, many contributors to our research also pointed to a structural problem with scaling up: the tax system, incentives for growth and access to SME funding.

Our experts also told us how, in order to succeed and scale up, AI start-ups must embed their technology into other UK sectors. However, this often requires substantial collaboration between a start-up and an established company, something which AI has often struggled to achieve. Larger companies can be slow to move and there is an element of scepticism and low risk appetite when it comes to the relatively new concept of AI:

‘The UK has a history of fantastic innovation, but not a history of turning that into global blockbuster companies. The rules around corporate governance for companies in the UK mean that it isn’t attractive enough to go public in the UK rather than the US. Secondly, the incentives for building companies beyond a certain size – for example tax rules – need to be looked at. Currently it makes sense to build to a certain size and then stop. The government should create incentives to encourage people to build and scale … At the minute a UK company is much easier to acquire from either Europe or the US … we’re at a disadvantage if we want to expand into other markets.’

Paul Drayson, Sensyne Health

‘Some of the problems are quite common across organisations. For example lots of organisations have started the journey and have had successes at delivering [AI] projects on a small scale but really struggle to scale up across the whole organisation … It’s considered an IT delivery project rather than a business change project.’

Ed Mitchell, EY