Britain looks to upstage France with play for world's third major AI hub after U.S., China

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• At the London Tech Week conference in the Olympia events venue earlier this month, tech executives from around the world touted London and the U.K. as a place to invest.
• Last week, Salesforce opened its first flagship AI center in London, as part of a five-year $4 billion investment commitment to the U.K. announced last year.
• London is facing heated rivalry from France for the title of European AI leader.
• Some critics have poured doubt on Britain's ability to stay ahead as Europe's leading AI hub.

LONDON — Global tech entrepreneurs and investors are talking up the U.K.'s potential to become an artificial intelligence powerhouse rivaling the likes of the U.S. and China.

But key challenges face the country as it looks to become the world's third-biggest AI hub.

At the London Tech Week conference in the Olympia events venue earlier this month, tech executives from around the world touted London and the U.K. as a place to invest.

They spoke highly of how well-connected the tech and AI ecosystem is, particularly in London, as well as the prestige of many of its top universities and schools.

Alex Kendall, CEO of autonomous driving technology firm Wayve, said his company was committed to London as its central headquarters.

Asked whether he would consider relocating the firm — which recently raised a $1 billion funding round from SoftBank and others —  Kendall said Wayve's headquarters is "remaining and staying in London."

"I love the environment here," he said in a talk onstage with tech investor Brent Hoberman.

"The thing that's special about London for me is that it's a tech superpower but it's not tech dominated. It's diverse, it's culturally rich."

Wayve has offices in London, San Francisco and Vancouver.

U.S. tech giants bet big on UK

Indeed, London is home to vibrant tech ecosystems, with prominent technology brands like Sage and venture-backed startups Revolut and Deliveroo.

But it's also done well attracting deep-pocketed U.S. tech firms from overseas.

In 2014, Google snapped up British-founded AI lab DeepMind, whose tech is now a core part of Google's AI product offering, including its generative AI tool Gemini.

Last week, Salesforce opened its first flagship AI center in London, as part of a five-year $4 billion investment commitment to the U.K. announced last year.

The 40,000-square-foot space, located in London's Blue Fin Building skyscraper, kicked off its opening ceremony with an event hosting over 100 developers.

Janet Coyle, managing director of London and Partners, said one thing that makes London attractive for tech firms is that leading businesses, regulators, and VCs are located within a short distance of each other.

"You can do a lot of meetings in one day," Coyle said at the Salesforce AI center last week. "You can actually meet the regulators, the financiers, the creatives, the developers."

"You can do about six meetings in one day, whereas other global cities you might have to travel across the country to meet the regulators or the financiers," she added.

London vs. France

London is facing heated rivalry from France for the title of European AI leader.

France last month held Viva Tech, the country's marquee technology industry trade show, hosting a huge 165,000 attendees in total.

Arthur Mensch, the CEO of France's leading AI startup Mistral, received much fanfare at the show.

French generative AI firms have raised $2.29 billion of venture funding to date, more than their U.K. counterparts, according to a report from venture capital firm Accel published last week.

The country is home to some of the best-funded generative AI startups in the continent, including Mistral, Hugging Face, and H.

London Tech Week, which was attended by 45,000 people in total across the main event and a number of fringe events, had less buzz than Viva Tech.

Hanno Renner, CEO of human resources startup Personio, said that European countries should think of AI as less of a competition and more of a chance to come together.

"The key piece for me is the U.K. and EU working together to find ways to foster European innovation to ensure that talent that's currently based in Brazil and wants to work in tech doesn't go to Silicon Valley, but comes to Europe, and it doesn't matter if it's London, Paris, or Berlin," he told CNBC.

Can the UK keep its European AI crown?

The U.K. remains by far the largest AI hub in Europe.

In 2023, U.K. AI firms raised well over $3 billion in venture funding —  more than double the amount raised by startups and scaleups in France, Germany, and any other European country, according to a report from industry body Tech Nation.

However, critics have poured doubt on Britain's ability to stay ahead as Europe's leading AI hub. They say several factors, including fallout from Brexit and low numbers of tech IPOs, could hurt its chances in future.

"There are bigger barriers to people coming in and working in the U.K., because of Brexit," Sanjot Malhi, a partner at venture capital fund Northzone, told CNBC's "Beyond the Valley" podcast earlier this month.

"The U.K. has had very good policies in terms of, you know, visas being more available and streamlining visa processes, especially for tech workers and so on."

"But I do think that there's a lot more that can be done to sort of streamline that and make it more accessible, and therefore a more thriving sort of tech environment," he added.

The anticipation of an impending general election looming over the country is also causing political uncertainty.

Many tech execs CNBC spoke to say they want more tech-friendly rules in future. One big ask is boosting IPOs and the U.K. stock market.

Philip Belamant, CEO of U.K. fintech firm Zilch, said he wants to list his business in the U.K. but is waiting to see whether more accommodative rules are put in place before reaching a conclusion.

"We have specific asks from the U.K. and policy to ensure that listing in the U.K. is something that means this company can thrive and is the best decision for our shareholders. What we would really like is to see those implemented."

Seeking regulatory clarity

Another key source of uncertainty for tech leaders is the future of AI regulation in the U.K. The incumbent government has crafted regulation of AI in Britain with a flexible, light-touch approach.

Rather than introducing new legislation for AI, like the European Union has done, the U.K. is instead seeking to apply existing regulations to the technology.

Some experts worry this approach creates legal uncertainty for companies developing and using AI, which is advancing at a rapid pace.

Matthew Holman, tech and AI partner at law firm Cripps, said the lack of any formal regulation for AI in the U.K. is ultimately a "net loss" for the U.K.

"This is because most organizations in the tech world crave certainty in order to build an environment in which to maximize creativity and ROI [return on investment]" Holman told CNBC in emailed comments.