In recent months, there’s been a lot of news that AI startups are leaving the UK for other countries. Back in February, the House of Lords Communications and Digital Committee published a report, expressing concerns about this trend. It warns that unless the UK steps up its support for AI and tech companies, it risks becoming an “incubator economy” — a place where promising startups are born but quickly move elsewhere after outgrowing their home market.
One example of this trend is the AI company 11X, which recently secured a $24 million Series A round and then relocated to the U.S. The UK has long been a thriving startup hub, but it seems to be losing its ability to keep these businesses within its borders.
The two big questions now are: why is this happening, and what can be done to turn things for the better?
The way I see it, this startup exodus is driven by multiple factors. The UK faces serious competition from other jurisdictions with more attractive regulatory environments, tax incentives, and funding opportunities. This issue is particularly pronounced with AI and tech startups because these businesses rely heavily on access to capital and specialized talent.
While London remains a global financial centre, post-Brexit immigration policies have made it more difficult to attract and retain international talent. AI startups need skilled engineers, researchers, and business leaders to succeed. And while the UK has many universities producing top-tier talent, retaining those specialists is a different story.
Many AI professionals are lured by better salaries in the U.S. and other AI-friendly regions. As such, AI startups looking for serious growth often find better opportunities beyond the UK’s borders.
At the same time, the overall funding environment in the UK has also created certain sluggishness and indecisiveness due to elevated interest rates. AI startups struggle to secure the kind of late-stage investment they need to scale. In contrast, other countries, including the U.S., provide clearer pathways for AI companies to operate and grow, making them more attractive for AI-focused entrepreneurs.
While the UK boasts several government-backed funding initiatives for venture capital firms, there’s still a notable gap in funding. And so far, the attempts to improve financial support mechanisms have been disjointed and ineffective.
Despite these challenges, I don’t think that this situation is beyond the point of being fixable. There are ways to retain more AI startups in the UK, but doing so will require creating a coherent and well-structured support system for AI startups.
The UK government is on course towards creating a regulatory environment that encourages AI innovation in a responsible fashion. This is a step in the right direction, but more efforts are needed. If the UK can establish more transparent and startup-friendly rules, it could remove a major barrier and encourage companies to stay and scale domestically.
Specifically, fostering growth in the tech sector means that there’s a need for stable access to funding. Dedicated AI startup-focused funds or targeted investment programs could help bridge this gap.
At the same time, I have no doubts that the UK needs to build a talent ecosystem that can compete with other countries. Better incentives for AI professionals will be necessary if they are to stay in the country: we’re talking not just better salaries, but also research grants and collaboration opportunities between universities and AI companies. There needs to be space for experimentation if the AI sector is to move forward in its development.
Looking ahead, the UK still has the potential to remain a leading AI hub, but it must act quickly. As things stand, we are seeing positive signs, but they need to be backed by strong policy changes and long-term support for startups. With the right strategies and financial backing for its tech businesses, the UK can continue to be a powerhouse for AI innovation.
Roman Eloshvili is the founder of ComplyControl, a UK provider of AI-powered services that improve risk management practices and ensure regulatory compliance among financial organisations.
The post UK AI startups are packing their bags. What needs to change? appeared first on UKTN.
