14 June 2023

Startups must be at the heart of the UK’s AI policy


Recent advances in artificial intelligence, from tools to detect cancer to managing crops, look set to disrupt and reform entire industries. But, as Rishi Sunak said this London Tech Week: while the UK has all the ingredients to be a global AI powerhouse, successfully implementing and adopting the technology long-term requires the right balance of regulation and innovation.

The UK’s current AI ecosystem is already a global leader—at last count we have just under 1500 high-growth AI startups employing over 20,000 people and generating more than £1bn in revenue. The UK is also home to 55 startups involved in cutting edge, generative AI – technology that even in its infancy can produce realistic text, images, music, and software code with use cases in healthcare, education, and financial services.

But the UK cannot afford to rest on its laurels. It must continue to capture the advantages of AI, for both society and the economy. And startups need to be a central part of all conversations about AI regulation.

Startups do things differently and take innovation risks that other companies are unwilling or unable to. For UK policymakers, startups will be an effective litmus test for future AI rules.

Regulation that works for startups can supercharge innovation, but regulation that disadvantages startups will likely also stifle the entire sector. Get this right and we can unleash a thriving new sector that rivals the UK’s incredible success and global reputation in FinTech. But, if policymakers get regulation wrong, the UK could squander its competitive edge and pass up the opportunity to lead the world.

This trade-off is not theoretical. While the FCA once had a strong reputation as a regulator that helped birth the UK’s FinTech revolution, startups are increasingly concerned they no longer have its attention or full support. Saying you have a sandbox for startups just won’t cut it anymore, especially without pro-innovation regulatory decisions to back it up.

The same is true in other emerging areas. For example, just this month the Food Standards Agency announced they might not have the resources to fix critical regulations for startups at the forefront of cultivated meat – a new sector that could cement the UK as a world leader in sustainable foods and help make us more self-sufficient.

Tech startups are arguably the economic success story of the last decade and will remain pivotal as we move to a more AI-integrated economy. Their role as the powerhouses of the UK’s future economic growth is clear as critical businesses in our own right, as well as enablers of a more productive future. But despite their phenomenal success, startups and the startup ecosystem are currently navigating funding crises, valuations cut, hiring frozen and job losses. We need the Government to help the ecosystem take the next big step in its development.

To better reflect this new era, the voice of startups in government, the Coalition for a Digital Economy (Coadec), has a new name – the Startup Coalition – as well as a new website and a new Head of Tech Regulation – me. I’ve joined to help make policy in the UK better for startups. And I will focus a large part of my work on helping startups lead the conversation on AI, both in understanding the risks and cementing the rewards.

We need to address today’s bread-and-butter issues for AI startups in order to supercharge their future and the greater economic future of the UK. And at the Startup Coalition, we are ready for the challenge.

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Kir Nuthi is the Head of Tech Regulation at the Startup Coalition, formerly Coadec.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.