AI firms have told a government-commissioned study that high taxes and political instability are pushing British start-ups to scale in America. The Ipsos interviews with 30 AI businesses, published yesterday afternoon by DBIST, found founders expect to go to Silicon Valley:
“Businesses noted a cultural and financial expectation that ambitious firms must eventually relocate to the US, specifically Silicon Valley, to access deeper pools of capital, higher risk appetite, and faster execution speeds. Domestic policy headwinds were also cited as a deterrent to scaling, with businesses pointing to high taxation and political instability as factors that left the UK ‘middle of the pack’ compared to pro-business jurisdictions.”
Firms had a clear fix for the jobs tax, saying that “reforming employer taxes, such as National Insurance, would remove the financial disincentive to hire young UK talent.” Reeves’ National Insurance raid strikes again…
The government report says British firms cannot match American pay, with applied data scientists earning up to four times more in the US:
“This disparity was driving a brain drain, with UK founders moving to places like San Francisco to improve their odds of success.”
One micro business said:
“We’ve got some fantastic brains and fantastic people but at the end of the day… they are being snatched up by the international players. I think we still have got the potential, but it’s just unused potential at the moment.”
A large AI firm said:
“At the minute there’s a real premium attached to any AI person with any kind of experience behind them… And that is a real expensive cost. We just can’t bear that.”
A medium-sized AI firm said:
“The UK doesn’t have an AI strategy at a national level or a government level … There are no incentives to come and buy from a start-up … you could almost look at apprenticeship credits offset against tax.”
Firms also want “targeted tax incentives for individuals and pension funds investing in AI, similar to existing schemes for fixed assets.” This week John Healey cut capital gains tax for a narrow group of potential founders and simplified R&D claims and investment schemes, but provided nothing on pension fund incentives, buyer tax offsets, or graduate salary subsidies. Tweaking around the edges…
Krishnan Guru-Murthy asked John Healey: “Just finally, I mean Andy Burnham has been very clear he wants Britain back in the European Union in his lifetime. Do you?”
The Chancellor replied: “I’m older than Andy Burnham. I don’t expect to see that.”