Published by Jessica Weisman-Pitts
Posted on September 1, 2021
5 min readLast updated: February 13, 2026
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By Neil Shah, Director of Research, Edison Group
Machine learning and AI is beginning to establish its critical role at the heart of business growth across most major industries. However, recent concerns over the potential for the technology to be used with malicious intentions has driven global recognition that it needs to be regulated. The establishment of the European Commission’s AI regulation is the first step in this process – but governments need to tread a fine line between negating harmful activity and discouraging innovation.
There is no doubt that frameworks need to be established in the AI sector; in the digital age, unregulated tech poses a true danger. But AI has captured the imagination of the UK business environment, and there is an opportunity for regulatory action that can help London become the central hub in the global tech and financial landscape post-Brexit.
Home advantage
Activity in the UK AI market has been building momentum for several years, with rapid expansion supported by increased investor interest. The number of AI companies has grown by 600% in the last decade, whilst the value of the sector has increased from $1.6 billion in 2011 to $46.3 billion.
This trend will only continue, and the UK should ensure that it is providing an attractive investor landscape for these deals. The establishment of a competitive regulatory framework that counteracts undesirable activity whilst also turning Britain into a home for innovation and creative thinking will be key in ensuring that tech talent is retained but also augmented with new players in the space. Not only will this provide an economy-wide boost as the nation emerges from the pandemic, but it will solidify the UK’s place in the global AI race.
Global AI landscape
The US and China have long led the charge of AI development, with funding far outstripping investment levels seen in either the UK or the European Union. A 2021 report from the European Investment Bank found that the US and China together account for over 80% of the €25 billion of annual equity investments in AI and blockchain technologies. This is enhanced by internal levels of funding; the Endless Frontier Act passed in June by the US Senate will provide approximately $120 billion for technology like AI and quantum computing.
Whilst it is unlikely that the UK will be able to match the sheer amount of funds dedicated to such technology, steps should be taken to close the investment gap and maintain momentum in the face of European competitors. Fostering innovation through suitable regulation could play an important part in the wider tussle for London to maintain its economic influence in the face of increasing competition from other tech capitals like Amsterdam.
Innovative thinking
Post-pandemic growth will be driven by innovative thinking across sectors. As we progress further into the digital age, technology will underpin the operations of all industries, and AI will likely be the key to rapid development in critical sectors such as healthcare and sustainability. The UK government has already taken steps to encourage such innovation through programmes like the NHS AI Lab’s ‘AI in Health and Care Awards’, for which they have recently announced thirty-eight recipients who will share £36 million of funding.
Companies with big ambitions in these sectors will be vital in tackling widescale issues that have been highlighted by the pandemic, such as NHS backlogs and the urgent need for lifestyle changes in the face of global warming. Whilst potential regulation should prevent misuse of often-discussed tech such as facial recognition and biometrics, it should have measures in place to ensure that AI innovation across other sectors is actively encouraged.
UK investor interests
Businesses in sectors like healthcare have huge growth potential and encouraging their expansion will play a key role in wider post-pandemic economic recovery. Identifying these industries and providing a home for their innovations will also maximise the appeal they hold to UK investors.
Currently,10% of UK AI companies operate in the fintech industry, but this is closely followed by cybersecurity and health-tech which represent 5% and 4.5% respectively. The success of DarkTrace’s London IPO was a marked contrast to other underwhelming tech floats of recent months, and this is likely due to the company’s focus upon AI and cybersecurity, both of which are sectors that are sure to have caught the attention of the UK investor as the scaleup of the nation’s tech firms gather momentum.
The establishment of frameworks that will capitalise on this investor interest whilst also reinforcing the UK’s attraction as a home for technological innovation will be a huge task, but it will be key to post-pandemic growth. The successes of the AI sector will feed into wider industrial development that will drive the economy, and recent momentum leaves the UK in prime position to make the most of this potential.
The UK AI market has seen a 600% growth in the last decade, driven by increased investor interest and the establishment of a competitive regulatory framework.
While the UK is making strides in AI development, it lags behind the US and China, which have significantly higher funding levels for AI technologies.
Sectors such as healthcare, fintech, and cybersecurity are experiencing substantial growth, with 10% of UK AI companies operating in fintech alone.
Establishing a regulatory framework is crucial to ensuring the safety and effectiveness of AI technologies while attracting investment and fostering innovation.
The UK faces challenges in matching the funding levels of global leaders in AI, necessitating steps to close the investment gap and maintain momentum in the sector.
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