A recent report indicates that between April 2024 and March 2025, global visits to AI chatbots are expected to surge by nearly 81 per cent year on year, reaching 55.2 billion.

The narrative surrounding the UK’s science and innovation sector should not be underestimated. As Saul Klein notes, the nation is establishing global companies and capturing international attention.

Despite concerns regarding sluggish domestic growth and the potential disruptions caused by AI, dismissing the UK’s science and innovation sector would be a mistake. The recent acquisition of AI firm Faculty by Accenture highlights the exceptional talent present in the UK that is successfully building globally competitive enterprises.

The UK is currently in possession of one of the most undervalued long-term assets in the global market: its innovation economy. Few countries can rival this asset, and even fewer are investing in it with their own capital. This situation is exacerbated by the growing awareness among international investors regarding the value of the UK’s innovation landscape compared to domestic investors.

The tech sector often gravitates towards trends, yet the UK’s innovation narrative is firmly grounded in data and facts. There is ample evidence to demonstrate the country’s capability in innovation, and it is time for the City to acknowledge this reality.

Britain: A Global Innovation Power

The UK ranks as the world’s third-largest innovation economy, trailing only the US and China, despite being the sixth-largest economy by GDP. On a per capita basis, it holds the top position globally.

In terms of unicorns, Colts, and Thoroughbreds, the UK outperforms France, Germany, Sweden, and the Netherlands combined. These entities are not merely inflated tech companies but are genuine businesses with measurable revenues. Colts generate at least $25 million in annual revenue, while Thoroughbreds exceed $100 million.

Since returning to the UK from working with early tech companies in San Francisco and New York 23 years ago, the landscape has transformed dramatically. The UK now boasts over 20,000 venture capital-backed businesses, employing around 100,000 individuals, including 800 Colts or Thoroughbreds.

Furthermore, a key indicator for AI leadership is large-scale compute deployment, in which the UK currently ranks third globally, possessing double the capacity of Switzerland, which is in fourth place.

It is important to recognise that companies and countries seldom lead in every technological shift. For instance, while Microsoft missed the mobile revolution, it dominated in cloud and AI technologies. Investors must adopt a long-term perspective, focusing on decades-long innovation waves rather than short-term trading windows.

The Future of Innovation

The next wave of innovation will be propelled by sectors such as AI, advanced materials, engineering biology, photonics, semiconductors, space, and quantum technologies—all areas in which the UK excels. These advancements have the potential to address critical challenges such as climate change, ageing populations, disease eradication, and energy security.

The UK is home to four of the world’s top ten universities: Oxford, Cambridge, UCL, and Imperial. Additionally, five of Europe’s top ten university spinout institutions are located in Britain. While the country excels at fostering startups, there is a notable lack of capital flowing from pension funds and insurers to facilitate the transition of these companies from early-stage ventures to global growth.

A Call for Domestic Investment

UK institutions control approximately £6 trillion in investable capital, yet less than 1% is currently allocated to the domestic innovation economy. This under-allocation allows international investors to dominate some of the nation’s most successful companies and assets. For example, Canadian, Australian, and Japanese capital supports Octopus Energy, while Australian super funds own significant portions of King’s Cross.

Research by Jonathan Haskell and Stian Westlake indicates that this underinvestment could cost UK citizens up to £143 billion annually in lost potential. However, for the first time in decades, the UK possesses the infrastructure to redirect more domestic capital into innovation.

The Mansion House reforms have doubled commitments from major asset allocators, and pension consolidation is expected to enhance this pipeline, thereby accelerating the growth of regional tech clusters in cities such as Leeds and Manchester.

Over £100 billion could potentially be injected into the sector throughout the current parliamentary term via a National Wealth Fund and long-term vehicles like the British Business Bank, the National Security Strategic Investment Fund, and Sovereign AI.

As regulation evolves from being perceived as a hindrance to a strength, the establishment of the Regulatory Innovation Office alongside progressive approaches from the FCA and CMA positions the UK as a secure and trustworthy jurisdiction for advancing frontier technologies.

Venture capital adheres to a power law: only 1.8% of startups become unicorns, while 1.3% reach $100 million in revenue. Consequently, the majority of returns are generated by a select few winners. Public markets reflect a similar pattern, with just 2.4% of companies responsible for 100% of £76 trillion in returns.

Therefore, it is imperative for asset allocators to comprehend the UK’s innovation strengths. For the first time in generations, the conditions are aligned: world-class research, a robust pipeline of startups and scaleups, growing domestic capital, international trust, and a supportive regulatory framework.

The pivotal question is not whether the UK innovation economy will flourish, but rather when the City will acknowledge its systemic undervaluation and enable British savers to benefit from the value being generated beyond the Square Mile.