Kemi Badenoch has issued a stark warning that the UK risks losing its position as a global leader in artificial intelligence (AI) if it adopts an over-regulatory approach. The Secretary of State for Business and Trade made her comments at the Politics UK Summit in Westminster, where she urged Britain to create a welcoming environment for AI firms rather than relying on extensive government industrial strategies.
The high cost of industrial energy and weaknesses within London's capital markets are two major concerns highlighted by Ms Badenoch. She pointed out that UK industrial energy prices are significantly higher than those in the US, which could deter the development of essential data centres needed to power advanced AI infrastructure. This would be a major blow to the UK's ambitions in this field.
However, recent figures from HSBC Innovation Banking and Dealroom suggest that UK startups have made a strong start, securing £12.7 billion in venture funding during the first half of 2026. Of this total, AI companies accounted for an impressive £12.6 billion – nearly three-quarters of all venture capital invested in the UK over this period.
But despite this promising beginning, Ms Badenoch cautioned that long-term growth could be hindered by structural issues. She noted a trend where successful startups often relocate to the US once they gain momentum, largely due to concerns about access to capital and the depth of the UK's capital markets. This highlights the need for improvements in these areas.
The Secretary of State likened the current stage of AI development to the early days of the internet, stressing the UK's ambition to be at the forefront of this technological revolution. She argued that rather than trying to control the technology through excessive regulation, which she believes is no longer feasible, the focus should be on retaining and nurturing AI companies within the UK.
Ms Badenoch's comments highlight a delicate balance between fostering innovation and implementing robust regulatory frameworks in a rapidly evolving sector. The government's approach will be crucial in determining the UK's future standing in the global AI landscape.
Source: Politics UK Summit, HSBC Innovation Banking, Dealroom