UK startups at risk of scaling overseas, warns Lord Mayor
The UK is “in danger of becoming an incubator economy – a place where start-ups develop transformative products and services before selling up or moving abroad”, the Lord Mayor of London is set to warn tonight, urging ministers and investors to act before Britain loses the rewards of its own innovation.
Speaking at the innovation and technology dinner at Mansion House, Alastair King will tell an audience of tech leaders and ministers that the UK cannot afford to let high-growth firms move overseas in search of capital.
“We need those firms which start here to stay here and to scale here”, he will announce. “Otherwise, other countries will end up reaping the fruits of our success”.
The comments come amid renewed debate about Britain’s global competitiveness and its ability to back its fast-growing AI and tech sector with sufficient long-term investment.
While UK startups raised more than £20bn in 2024, and the country is home to over 160 unicorns, the Lord Mayor will caution that the scale-up challenge, for now, remains unresolved.
Kyle pushes ‘smart regulation’
Sharing the stage, tech secretary Peter Kyle will attempt to counter such concerns with various pledges to accelerate regulatory approvals through AI.
Kyle will announce £2.7m in funding for five regulators, including Ofgem and the Civil Aviation Authority, to trial AI systems aimed at speeding up approvals for drones, clean energy and nuclear projects.
“Too often British innovators are waiting months for approvals whilst competitors overseas race ahead”, Kyle is set to say. “This isn’t about cutting safety corners – it’s about smart regulation”.
Kyle is also expected to unveil a “regulatory hackathon” in early 2026, bringing regulators and AI specialists together to design faster, AI-powered approval tools, as part of the UK’s Plan For Change.
Business groups broadly welcome the ambition, but caution against over-promising.
“Streamlining approvals is welcome, but there’s a danger of overselling what AI can deliver”, said Ben Bilsland, head of tech at RSM UK. “Regulators need the resources and independence to use these tools responsibly”.
Big ambitions
The Mansion House speeches come against a backdrop of heightened global competition.
Chancellor Rachel Reeves has committed record sums to R&D, while science minister Lord Patrick Vallance has urged the UK to “connect with its brightest clusters”, and deepen international partnerships, particularly with India.
Analysts have said the government’s long-term rhetoric is promising, but execution remains a question mark.
“The government will need to tread carefully to ensure the UK remains one of the best places in the world to start and grow a tech company”, Bilsland added, warning that looming tax reforms could undercut momentum.
Mark Boost, chief executive of Civo, has also warned that Britain’s AI ambitions risk being built on foreign cloud and hardware infrastructure, leaving the UK dependent on overseas providers even as it tries to build “sovereign AI” capabilities.
Competitive pressure mounts
The UK’s tech ecosystem continues to show strength, with more than 14,000 new firms launched in the second quarter of this year, a 16 per cent jump year-on-year.
A Barclays survey found 62 per cent of executives consider the UK a more attractive base than Europe, and 60 per cent prefer it to the US.
But with the US and China investing heavily in AI and digital infrastructure, and the EU tightening its regulatory framework, tonight’s warnings show just how fragile Britain’s position may be.
As King is set to announce: “It is vital for our prosperity, our security and our very viability for the United Kingdom – as Europe’s leading tech power – to stay at the forefront”.
“This means financing our startup companies, investing in our workforce, and bringing down every barrier to innovation”.