The UK’s artificial intelligence (AI) industry is likely to suffer following Brexit, despite the government’s continued attempts to make it an area of strong future growth, according to a report on the Brexit tech impact.

The report by GlobalData, entitled Brexit’s impact on global tech, found that although some companies in the tech industry will benefit from Brexit, many will see considerable damage as a departure from the European Union hampers their potential for growth.

The AI sector was highlighted as at particular risk of harm from Brexit, despite the fact that the government has made the sector a key focus of its post-Brexit plan. This includes significant investment in healthcare AI and the announcement of an AI sector deal designed to make the UK a leader in the field.

Brexit tech impact to see UK AI hamstrung

In the report GlobalData highlighted “the UK’s lofty ambition to be a leader in artificial intelligence” as a “potential casualty from Brexit”, citing the loss of EU funding as a core contributor.

“The UK academic community is doing groundbreaking research into AI, but uncertainty over future European research funding – indeed funding generally – threatens to introduce unwanted barriers to those efforts,” the company wrote.

“Ultimately, just as Brexit has already led to TV companies going to the Netherlands and fintech companies to Dublin, it is possible that new European research centers will attract top AI talent from the UK and the UK’s hopes of being a leader in AI will prove to be literally ‘artificial’.

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“The government talks a good game about winning the global race in areas like AI, but not even British athletics legend Mo Farah could win a race with his legs tied together. If the government expects the UK’s tech sector to continue to thrive it has to create the conditions for it to do so.”

UK startups face funding challenges

The report also highlighted UK startups as likely losers when it comes to the Brexit tech impact.

This is because they are likely to struggle to attract funding once the UK departs the European Union.

“The biggest losers will be UK tech startups and scale-ups in search of funding. The UK has typically been the default stop for US tech investment, but any Silicon Valley CEO looking at the UK’s likely post-Brexit hangover (and current political turmoil) will either put off a decision indefinitely or opt for an alternative base that is both tech-friendly and offers strong English-language skills,” wrote GlobalData.

“’Dublin or Amsterdam will do fine for now – and we’ll look at it again when things are clearer,’ would be an understandable response.

“That is not to say UK tech investment will dry up altogether, but it’s likely, for now, that the UK will no longer be the default setting on the US corporate investment dashboard. When there is more post-Brexit business clarity, that investment will be back.”

The tech companies that will benefit from Brexit

Notably, GlobalData highlighted than not all companies in the tech space will lose out from Brexit.

Large international companies will strong resources will likely thrive, as they will be able to adjust practices and locations to avoid the worst of the Brexit fallout.

“The big global tech players will come through the waves caused by Brexit because they have a big enough boat to ride them and a European harbor to sail for,” the company wrote.

“Those that have the infrastructure already in place, including a European base, will be well equipped to cope, provided they can rely on smaller suppliers in the event of a ‘No Deal’, as will those firms – typically fintech companies – that benefitted from a regulatory push that forced them to plan, act early, and (in many cases) move out of the UK, several of them to Ireland.”