Unlocking investment and driving economic growth are two of the key missions of Keir Starmer’s new government. Yet for artificial intelligence – one of the UK’s highest growth industries – investments risk being held back by a lack of alignment between the Government and the competition regulator.
While the UK has sought to position itself as the leading AI hub in Europe, the Competition and Markets Authority has decided to focus on risks rather than the opportunities of AI. Until this disconnect is addressed, the UK risks losing its edge in the field.
At present, the UK is home to the most AI firms in Europe, totalling over 1,680, according to the Global AI Ecosystem database, with the total value of the sector expected to reach $1 trillion globally by 2035. These companies are already making important advancements, notably in healthcare, where AI is streamlining complex ultrasound measurements to diagnose heart conditions and enabling earlier detection of cancer. As a result, the UK is well positioned to be the European leader in a sector which is projected to reach $1 trillion in value by 2035.
However, the small businesses that are championing AI innovation face major barriers to success. Crucially, they need vast amounts of investment to pay in-demand talent and buy vast amounts of ‘compute capacity’: thousands of servers with specialised chips that execute trillions of operations to power large language models. Therefore, AI firms are under immense pressure to scale and deploy their products at pace. Each company is, in essence, racing to deploy a commercially viable product before their funding runs out.
As a consequence, small AI businesses are almost entirely dependent on capital injections to manage both astronomical costs and major business challenges. And, so far, it has been the established tech companies that have stepped up, entering into partnerships with AI startups, to provide the backing that these innovators need.
However, the CMA considers this support an area of ‘increasing concern’ due to supposed market concentration risks and is even going as far as to investigate whether non-controlling investments between separate non-British companies should be subject to scrutiny under the Enterprise Act.
This is alarming not only for investors in these smaller AI companies, but also for the innovators themselves. When a regulator steps in and challenges an investment, it does not just put one partnership at risk; it deters others. This begs the question as to whether the CMA is actually supporting AI innovation as it says it does.
Investors fundamentally look for markets where government and regulators are working toward a shared vision for the economy, without this they will rightly look elsewhere. The new government must now decide if they want the UK to lead the way in AI innovation, with all the economic growth and high-skilled jobs this involves. If so, they must work with the CMA to present a shared vision for a British AI economy. Without this, investment will remain out of reach and growth opportunities will remain untapped.
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