As the UK prepares to deal with an election in early July, tech business leaders will want our politicians to set out the roadmap of how they will remove the barriers to growth and take action to address the threats to entrepreneurs’ success, enabling the full benefits of technological innovation for the UK.
The UK startup ecosystem is firing on all cylinders, attracting record investment and solidifying its position as a global tech powerhouse. In 2023, UK startups raised a staggering £21.3 billion – the third-highest total on record. Notably, this impressive funding haul came despite the economic headwinds and the aftermath of the pandemic. Venture capital investment showed resilience and rebounded in the second half of the year, which meant a 46% increase compared to the first six months.
The UK's pre-eminence in emerging technologies like medtech and wearables, electric mobility, autonomous vehicles, and climate tech have been the catalysts for this level of success. AI-based startups have raised £4.5 billion last year, showcasing the nation's prowess in this transformative field. With a well-established venture capital community armed with over £25 billion in fresh funds raised in the past three years, the investment outlook for UK innovators remains stellar.
Obstacles to innovation and growth
The UK has built a competitive business environment that is comparatively easy to operate in. It is supported by strong demand for tech products and services, as well as positive ecosystem effects.
However, UK plc is concerned about the costs of doing business here. The country has faced exorbitant energy prices and a cost-of-living crisis. This is compounded with the high level of business taxes, the impact of interest rates and regulatory burdens – all of which pose serious challenges to entrepreneurs. Other issues commonly mentioned include access to procurement contracts and the fact that UK lacks behind its economic counterparts when it comes to digitisation of its economy, and more broadly, automation across industries and manufacturing.
A seven step plan for the new Government
However, to sustain this momentum and truly cement the UK as a tech superpower, the incoming government must implement forward-thinking policies that foster an environment conducive to innovation. Here are the key tech priorities that should top the agenda:
1. Double Down on AI and Emerging Tech
The UK's global tech rankings – #3 worldwide and #1 in Europe – are a testament to its leadership in cutting-edge domains like AI, cleantech, and mobility tech. Building on this strength should be a key priority. Measures like boosting R&D incentives, creating AI-focused innovation hubs, whilst attracting top talent through favourable immigration policies, can accelerate AI adoption and commercialisation.
2. Bridging the Digital Skills Gap
While UK businesses have enthusiastically embraced AI with 70% of AI adopters using generative AI in 2023, a crippling digital skills shortage threatens to stall progress. This problem is nothing new to UK plc and the vast majority of companies struggle to find employees with requisite digital capabilities. Closing this gap through comprehensive digital skills programs, STEM education initiatives, and training incentives for businesses must be prioritised.
3. Levelling the Playing Field
The uneven distribution of digital adoption across UK regions and industries represents a massive untapped economic opportunity. By driving AI and tech uptake in laggard areas like Wales, the South West and the North of the country, agriculture, and hospitality, the UK could unlock billions in additional GDP. Tailored regional strategies, along with resources to assist small businesses in tech modernisation, could help democratise innovation.
4. Regulatory Renaissance
As emerging technologies like AI, autonomous systems and digital health bloom, an agile and innovation-friendly regulatory framework is crucial. The new government should pursue "regulation by collaboration," actively engaging industry and subject matter experts to craft balanced guidelines that safeguard citizens while allowing the responsible development of transformative solutions.
5. International Trailblazer
The UK's exit from the EU has allowed it to forge an independent trade policy geared toward the industries of the future. Prioritising bilateral "digital economy agreements" focused on new economy sectors like tech, cleantech, and creative industries would enhance market access and cross-border data sharing. The UK should also double down on "Tech Bridges" – partnerships with leading digital nations to collaborate on shared challenges like online safety and ethical AI development.
6. Focus on medical technologies
Like its European counterparts, the UK is facing and aging population increase which means more strain on medical services. The Government has pledged a £30 million investment in innovative medical technology (medtech) which will help ease pressures on the NHS. It is believed it could include the expansion of 3D checks that speed up cancer tests and novel logistics solutions such as the use of drones. However, we believe that this initiative does not go far enough – more substantial funds should be made available for wearable technologies and devices that enable the provision of care for the patients in their own home, further removing the burdens on carers and practitioners.
7. AI-powered automation of services
According to the Alan Turing Institute, artificial intelligence could help automate around 84% of repetitive transactions across 200 government services. It could make government services more efficient and citizen-oriented, which would improve public satisfaction, cut costs and free up civil servants’ time to focus on other tasks. Governmental transactions are central to the way rules and regulations are enforced, licenses for activities are provided, and benefits are distributed so the benefits to UK businesses would be tremendous. They could also help us respond to global challenges like climate breakdown.
The UK stands at a pivotal juncture, with a generational opportunity to usher in a new era of tech-fueled prosperity. By making tech policy a key focus, the incoming administration can propel the nation to true "science and tech superpower" status – a feat that may be achieved as soon as 2028 if AI adoption continues its torrid pace.
With a potent blend of robust startup investment, a flourishing climate tech and AI ecosystem, and an appetite for emerging technologies across industries, the pieces are in place. Timely and decisive government action nurturing this conducive environment can transform the UK into the world's preeminent tech innovation hub for decades to come.
