Why is Britain lagging in the global AI race?

The United Kingdom has placed fourth in the Global Artificial Intelligence (AI) Index – the first of its kind to benchmark nations on their investment, innovation, and implementation of AI. Yet despite this potential, much of our homegrown tech talent is moving abroad.

In this instalment of Finextra’s Explainer series, we look at how the UK has become a world leader of research and training in AI, and why this key opportunity for economic growth is being squandered.

The AI brain drain

Technical ambition, ability to scale rapidly, and planted in Britain’s world-leading AI research base – these are the characteristics of technology firms the Government wants to foster. The strategy is to educate and train Britain’s brightest in AI, help them set up businesses, then support them as they evolve into productive, growth-driving cogs within a lucrative and domestic technology industry.

Key policy moves have been made to this effect. In November 2026, for example, the UK Government pledged £137 million to “AI for science” strategy – and made other commitments to improve compute capacity.

However, it turns out that fostering talent alone is not enough to drive economic growth. AI developments must be rapidly spun into commercialisation – something our transatlantic cousins are doing very well. So, well, in fact, that Britain is suffering an AI brain drain, with its top talent vanishing abroad – especially to the United States – in pursuit of favourable economic opportunities.

Funding, infrastructure, and salary: The three pull factors

Data released by Global AI Index, which was launched in December 2025, underscores that while the UK is excelling in training AI talent, it is struggling to transpose it into long-term businesses. Meanwhile, the US, which is first in the Global AI Index – above China, the European Union, Singapore, and the UK – offers easy access to funding, robust AI infrastructure, and all the requisite human resources.  

The Observer shows that in 2024 “UK AI firms attracted more than £2bn in private funding in 2024…about twice France’s (£1.1bn) and five times Germany’s (£440m) – but that still amounts to just 3% of private investment in the US.” Growth capital for frontier AI is “overwhelmingly American”.

Another significant pull factor is salary. The US and China are actively headhunting global AI talent and offering eye-wateringly large pay checks. In June 2025, The Guardian reported that Meta CEO, Mark Zuckerberg, spent months “putting together a list of the top AI engineers and researchers across the globe, preparing to offer potential recruits lucrative compensation packages” – some worth $100 million.

If it is to retain its AI talent, the UK must also work on its infrastructure. At the moment, UK industrial growth is hampered by some of the highest electricity prices in Europe. Across the pond, where there is less reliance on imported natural gas and green policies are slack, is a thriving supply chain of data centres and AI model creators like OpenAI – not to mention the computer chip behemoth, Nvidia.

All this means AI start-ups based in the UK are finding it increasingly hard to compete on the global stage.

Regaining ground in the AI race

The UK’s issues around infrastructure, salaries and funding, result in a strong gravitational pull in the direction of the American planet – where founders believe they will benefit from a longer runway and make healthier returns. If the UK Government cannot answer this pull factor, it may not remain a world leader in AI for long.

But it’s not too late to turn the tide. An aggressive policy could be adopted now – looking at reforms to the capital gains taxation system, more financial incentives (such as the £100 million AI advance market commitment unveiled in November 2025), access to affordable, large-scale computing power, and – of course – clear AI regulation.

If the UK Government focuses on these objectives ahead of the next election, it will convince AI founders to stay – and build its own Silicon Valley in London.