London’s push for AI sovereignty

0:02Good morning from the Financial Times. Today is Monday, July 6th. And this is your FT News Briefing. We are doing something a little different today because our staff is off for the July 4th holiday here in the States. So as you know, the 4th of July celebrates America's independence from the British 250 years ago. And today, the UK is working on its own independence movement to free itself from America's big tech companies. We're going to dedicate the whole show today to exploring how that's going. I'm Mark Filippino, and here's the news you need to start your day.

0:42The tech industry is having a bit of a renaissance in London. It's home to the main foreign outposts for giants like Google and Meta, not to mention their very well-funded AI challengers like OpenAI and Anthropic. The thing is, all the companies I just mentioned are American. Britain's big AI success story, DeepMind, was acquired by Google in 2014. Now, though, there's a push to launch a homegrown competitor so the UK can have more sovereignty over its tech. Here to tell us more is the FT's global tech correspondent, Tim Bradshaw. Hi, Tim. Hey, Mark. So before we get into the London tech renaissance I mentioned, let's go back to the sale of DeepMind, which a lot of people consider the original sin.

1:25Walk us through what happened there. so google bought deep mind back in 2014 for i think somewhere around 400 million pounds and so pretty soon after that deal happened there was a fair amount of hand-wringing in the uk tech community about whether what was clearly a very very promising british ai startup should have been allowed to be sold to foreign ownership it was very obvious that dennis hasabis and his co-founders were doing really important work. And Dennis has said that they sold because they needed huge amounts of computing infrastructure and Google's deep pockets to fund the kind of research that they wanted to do, which was to build this once sci-fi idea, but now seemingly quite close idea of an artificial general intelligence, an AI that can do anything that a human can do.

2:20So the criticism is that DeepMind could have been a huge boon for the London tech sector, but the fact that it's owned by Google means that the UK government has less control over the technology. This sale happened more than a decade ago. Why is this debate bubbling up again? I think the whole concept of AI sovereignty has been bubbling up ever since ChatGPT burst onto the scene and governments around the world that weren't American or perhaps Chinese realised that if AI develops into the, you know, economic force that many people in Silicon Valley believe it can be, then they're going to be at a disadvantage because their economies are going to be hollowed out by American businesses and a very small number of American businesses.

3:03And so what's also striking, I guess, for the UK as a whole is that although the UK has produced Arm, the chip designer, and a number of other big tech companies over the years, none of them have become the kind of trillion dollar businesses that we've now got more than a dozen of in the US. And so that then crystallized even further on a Friday night last month when the US Department of Commerce rang up Anthropic and said, hey, you have 90 minutes to turn off all foreign access to your most advanced models. And that was really a kind of warning shot for what could happen in the future if any foreign economy is reliant on American AI models and they might suddenly be turned off overnight.

3:50Yeah, and we should mention that the ban has now been lifted, but the lack of agency is certainly troubling for a lot of countries that want to have more control. So what is the UK doing to try to have that agency and build its own AI systems? Well, there's a few things going on in both the government level and the private sector. And the government has put forward some hundreds of millions of pounds for its sovereign AI fund, which is an effort to back what the investors and ministers involved in that project see as the kind of next wave of AI. So that includes some different types of AI systems that are taking a different approach to the large language models that underpin ChatGPT or Gemini or Claude.

4:38But those are all quite sort of long term, even blue sky bets. And at the same time, there are a handful of companies in London that are showing that Britain can still produce meaningful multi-billion dollar valuation AI startups. There's companies like Eleven Labs, which does audio AI, Wave, which does self-driving cars. And then most recently, a couple of startups that were founded in part by people who had recently left DeepMind, Ineffable Intelligence and Recursive Superintelligence. And they have been able to raise hundreds of millions of dollars for effectively a team and an idea quite early in their life cycle.

5:20And so a combination of, you know, government support for startups, coupled with the fact that there are researchers leaving DeepMind and choosing to stay in London, finally, and raising real capital. That's what's really kind of boring people's spirits for the UK's AI scene right now. But it's taken a long time to get here. Yeah. And, you know, not to pour cold water on it, but these companies are up against some really large American competitors. Yeah. I mean, I think the whole sort of King's Cross area is a microcosm of this. So King's Cross is where DeepMind is based and has been since it started.

5:52And I think the UK tech industry owes Demis Hassabis some thanks for keeping DeepMind there rather than moving himself and his team to San Francisco along with the rest of the Google crowd. And so a lot of the folks that are now starting companies have spun out from there. That has made King's Cross a real magnet for AI talent. And so that's great in some ways that there's lots of money coming into King's Cross and that cluster exists. But as you said at the beginning, this is still largely American money. And a lot of the complaints that I hear from British or UK-based AI founders and entrepreneurs is that actually extracting talent from those big tech companies is quite difficult because you have to pay very high salaries.

6:36AI in general is a game of talent. There is still a very small number of people in the world that actually know how to build AI and do that from scratch and make research breakthroughs. And a lot of those people are in London. So it's really just a question of whether these startups can incentivize some of those researchers to take a risk and leave the very deep, comfortable, rich pockets of big tech. Can UK companies actually compete or is it too late? Do they have too much ground they have to make up? Like 15 years ago, I was the first reporter to write down the nickname for London's tech scene, Silicon Roundabout, which was at the time kind of intended to be ridiculous and slightly self-parodying because it was such a small scale phenomenon compared to what was happening in Silicon Valley.

7:24But there was nonetheless the sort of germ of an idea there of British startups kind of doing something interesting for the first time. And to kind of see how far the UK has come in that 15 years that we are talking about companies that have raised hundreds of millions of dollars in their seed round is, you know, extraordinary progress for this country's tech scene. And I don't think that should be dismissed lightly. But it remains to be seen whether that is just the UK is being sort of carried up in this broader AI boom. I think, you know, it is indisputably a good thing that these companies are being based here.

7:57The other question that I hear from some folks in Westminster is that they would like those companies to be truly British and truly sovereign. Many of these startups have their ultimate sort of parent company incorporated in the US, often in the state of Delaware, which is kind of tax friendly and makes it easier to raise capital from American investors. And I think it should also be clear that even if those companies have their main functional headquarters and staff in London, more often than not, the majority of their capital is still coming from the US. And so there is a second order question about if these companies do become big, is it the British taxpayer that really benefits from that?

8:41Tim Bradshaw is the FT's global tech correspondent. Thanks, Tim. Thanks, Mark. You could read more on this story for free when you click the link in our show notes. This has been your daily FT News briefing. Check back tomorrow for the latest business news.

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