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Home GREEN

Startups back UK’s AI strategy — but concerns over energy supply and lack of scaleup funding remain

Siftedby Sifted
January 13, 2025
Reading Time: 3 mins read
in GREEN, UK&IRELAND, VENTURE CAPITAL
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Startup founders and investors threw their weight behind the UK government’s ambitions to boost the country’s AI capabilities, but some warned that questions over a lack of scaleup funding and the technology’s energy demand remain unanswered.

On Monday, prime minister Keir Starmer announced plans to “revolutionise” the UK’s public services by using AI to automate tasks and cut costs, following a report drawn up by tech entrepreneur Matt Clifford.  

Industry leaders such as autonomous vehicle developer Wayve, GenAI startup Synthesia and data centre provider Nscale, alongside US GenAI giants OpenAI and Anthropic, lauded the wave of measures announced to boost the UK’s AI capabilities. 

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Others were more sceptical. “The plan has a lot of very constructive recommendations… but this is something that was supposed to arrive much sooner, and at the moment it feels like we’re playing catch-up,” says Anastasia Bektimirova, head of science and technology at the Entrepreneurs Network.

Since the strategy was published, Sifted has heard from dozens of people in the UK startup community to gauge their reaction to the AI Action Plan.

Energy concerns 

The UK said it would prioritise securing private investment into AI infrastructure, build a new supercomputer and make it easier for startups to tap international talent, following a report by Entrepreneur First’s Matt Clifford, who will also advise the PM on how to implement the recommendations as part of a new role with the government.

The plan is “ambitious but light on detail”, says Hussein Kanji, partner at Hoxton Ventures. “For instance there’s no mention of the UK’s high cost of industrial electricity.”

Nvidia’s new GB200 NVL72 AI superchip, for example, consumes more than 10 times more power per rack than those in a typical non-AI data centre. 

The UK has some of the highest energy prices in the world — and Luke Alvarez, managing partner at Hiro Capital, argues that the UK needs to embrace nuclear energy and gas in the short term to address this. 

“In general we need a much more flexible, hybrid and fast-moving approach to getting us a lot more electricity, quickly, to power data centres and compute,” he says. “We need a lot more energy fast.” 

Lack of funding

Others say that the plan doesn’t address the lack of scaleup funding available to startups in the UK.

“One area that hasn’t been addressed is access to late-stage capital for homegrown startups,” says Simon King, partner at Octopus Ventures. 

“There is a limited, but closing, window to build the Google, Amazon or Meta equivalents in the age of AI in the UK. Huge investments — in the hundreds of millions — will be required if UK AI entrepreneurs are to compete on the global stage,” he adds. 

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In August last year science minister Patrick Vallance told Sifted that a “really big block” at the scaleup phase, including access to funding, was holding the UK tech sector back. 

There have been some attempts in government to remedy that, with chancellor Rachel Reeves mobilising £80bn from pension funds for investment, including into VC, but it may be some time before such decisions bear fruit. 

“This plan contains sensible steps to safely adopt AI at scale,” says Marc Warner, CEO of AI startup Faculty. “But we’ve heard similar rhetoric before. Bold policy must now follow today’s encouraging soundbites if the UK is to truly have AI ‘mainlined into its veins’.” 

Read the orginal article: https://sifted.eu/articles/uk-ai-strategy-reaction-news/

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