The UK has the biggest AI sector in Europe, worth $92 billion, according to research from Tech Nation.
In a new report, UK Tech in the Age of AI, Tech Nation found that in the first quarter of 2024, 16% of all UK venture capital investment went to AI startups.
The UK is home to more than 1,800 VC-backed AI startups, with 20 unicorns including Synthesia, Wayve, and Stability AI. It takes top place in Europe for AI investment by quite some margin and is ranked fourth globally behind the US, China, and Israel.
"We are witnessing another landmark achievement for UK tech and another milestone in our remarkable growth story," said Carolyn Dawson, CEO of Founders Forum Group and Tech Nation.
"We now have the opportunity to lead the responsible development of AI on a global scale."
UK AI startups raised $3.4 billion across 2023, the second highest total on record. Investment grew year on year by 10%, bucking the trend of overall UK and global venture capital, the study found.
The biggest raises were made by driverless vehicle startup Conigital, and AI lending platform Abound, both raising $630 million, as well as Builder.ai, which raised $250 million.
Despite the hype, funding for pure generative AI startups made up just 9% of total VC investment into UK AI companies in 2023, at $321 million. However, investment in generative AI has still boomed in the past two years, with significant raises in 2023 by generative AI bid writing tool AutogenAI and video generator Synthesia.
"With some 16% of all VC investment now going to AI companies, it is clear that investors have an appetite and dry powder to deploy – but what does that interest mean for founders?" said Simon Bumfrey, head of technology and life sciences for HSBC Innovation Banking UK.
"As hungry as investors appear to be for AI-driven solutions, they are unlikely to be wooed by tech alone; nor are they likely to invest in any business that is unable to deploy AI in a responsible, sustainable way. While it may be tempting to put AI at the heart of your pitch, it’s important to remember that investors will always favour stability and the ability to scale efficiently at speed."
The UK tech sector overall reached a record combined market valuation of $1.08 trillion in 2023 - an eight-fold increase over the past decade, and almost twice the figure for five years ago.
Tech Nation said this growth looks set to continue in 2024, with the UK tech sector valued at $1.1 trillion - making it the third most valuable in the world after the US and China, and number one in Europe.
London is the UK’s most valuable tech ecosystem, with a combined market valuation of $648.6b in 2023, followed by the East of England, the South East, and the North West.
The report also included a survey of UK tech professionals, finding that 69% of respondents believe that AI is having a positive impact on them, and will positively benefit the UK economy within five years.
More than seven in ten say AI is having a positive impact on their industry, while only 9% say AI is having a negative impact. Eight-in-ten reckon that AI will have a positive impact in five years’ time.
