The year 2025 is likely to go down as a difficult 12 months for Britain but gloomy sentiment about the wider economy is overdone.
The UK’s tech sector, for example, has a lot to celebrate. So far this year, the UK has outpaced France, Germany and Switzerland to take a greater share of startup venture capital funding – at $21bn – than any other country in Europe.
The UK is sitting on an underpriced long-term asset that few countries possess: its innovation economy.
Across nearly every innovation metric, the UK now ranks third globally, despite being only the sixth largest economy by GDP. The UK has more unicorns (companies valued over $1bn) as well as “colts and thoroughbreds” than France, Germany, Sweden and the Netherlands combined, according to new data from Dealroom. These are businesses that are already contributing economically, creating jobs and growing GDP. Colts have annual revenues of at least $25m, and thoroughbreds revenues of over $100M.
The UK is home to 240 thoroughbreds, roughly 30% of Europe’s leading tech companies. These companies have an enterprise value of $601bn (£452bn).
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These strong and growing companies have pulled away from a group of more than 800 VC-backed companies. When I came back to the UK from San Francisco and New York, 23 years ago, Britain had fewer than 10 VC-backed businesses.
Looking to the future, the UK also has 50 deep-tech champions tackling the capital-intensive, science-heavy sectors including fusion, quantum computing and energy resilience. Deep-tech investment is now 31% of UK VC, triple its share a decade ago.
Britain ought to pay more attention to the inputs that are driving this. The UK hosts four of the world’s top 10 universities in Oxford, Cambridge, UCL and Imperial. Beyond those there is also a wide constellation of universities with specialist strengths from King’s (war studies) through to LSE (policy), Glasgow (chemistry), Bristol (quantum), Southampton (photonics), Manchester and Swansea (materials), to Edinburgh and Birmingham (interdisciplinary research).
Britain has the intellectual property to make the word sit up, and it doesn’t have to lead every cycle, just one. Companies and countries rarely lead every technological shift. Microsoft missed mobile but dominated cloud and AI. Apple missed early internet software but led smartphones.
Long-term investors need to think in terms of decades, not just trading windows. The current wave, which has much longer to play out, is one of generative AI, advanced materials, engineering biology, photonics, semiconductors, space and quantum. This wave is aligned with Britain’s strengths.
More good tidings? For the first time in decades, Britain has domestic capital and regulatory infrastructure aligned to support innovation at scale. More than £100bn could be deployed into the sector over the life of this parliament, through a National Wealth Fund and long-term vehicles such as the British Business Bank, the National Security Strategic Investment Fund and Sovereign Science.
Britain has the intellectual property to make the word sit up, and it doesn’t have to lead every cycle, just one
Major asset allocators have doubled their commitments to UK innovation, and pension consolidation will strengthen this pipeline further and accelerate the rise of regional tech clusters in cities such as Leeds and Manchester.
At the same time, regulation, once seen as a national weakness, is becoming a distinctive advantage: the new Regulatory Innovation Office and increasingly progressive stances at the Financial Conduct Authority and the Competition and Markets Authority position Britain as one of the safest and most trusted jurisdictions for scaling frontier technologies.
Making this country world class (again) will require energy reliability, scale-up capital, planning reform and companies that are willing to become the first customers of startups, alongside government. The UK also needs to be a good neighbour, both to our allies in Europe and to the Commonwealth and countries in the Middle East, Asia and Africa. We can have more than one “special relationship”.
If the next era is defined by science as much as software and by purpose as much as profit, Britain can build not the next Silicon Valley but a different one that works for people (not just for investors and outliers). The role models are already starting to emerge: here in the UK in places such as Somers Town, next to Google’s new European headquarters, and in Europe, across New Palo Alto – a connected cluster across countries within five hours of central London.
The final factor that has not been priced in is Britain’s emerging leaders; across central and local government, arms-length bodies, business and culture. It’s not just founders who are driving ambition forward. Officials who shepherded the country through Brexit, Covid and the war in Ukraine are providing globally relevant leadership.
Next year is the 175th anniversary of the Great Exhibition, a global showcase of industrial might and ingenuity. It’s also the 75th anniversary of the Festival of Britain, another defining moment when the country articulated an optimistic vision of its future. Next year we should take the opportunity to reintroduce ourselves to the world because we’re sitting on Britain’s best strategic opportunity in 150 years.
The UK has rare alignment: world-class scientific inputs, deepening innovation outputs, domestic capital, international trust and a regulatory system that can enable safe experimentation. It’s time to invest in our own innovation, based on facts, and put the doom and gloom behind us.
Saul Klein is executive chair and co-founder of Phoenix Court, EMEA’s top venture investor in both unicorns and thoroughbreds at seed stage, and has been a member of the UK prime minister’s council for science & technology since 2021