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UK Investment in AI and IoT: A Mixed yet Optimistic Picture
The UK's investment landscape in Artificial Intelligence (AI) and Internet of Things (IoT) technologies presents a mixed yet optimistic picture, as we approach mid-2025.
While overall venture capital investment in the UK has seen a decline, with £2.6 billion invested across 435 deals in Q2 2025 – the lowest level in five years – the AI sector remains a dominant theme, alongside sectors like health tech and fintech. AI attracts some of the largest deals, indicating it is seen as a high-growth area despite broader investment pullbacks.
The AI sector in the UK is projected to have a substantial economic impact. By 2035, it could contribute £630 billion to the economy and potentially boost GDP by 22% by 2030 through productivity, innovation, and market expansion effects. More than half of European AI-related private investments come from the UK, and the sector supports around 50,000 jobs contributing £3.7 billion to the economy.
AI adoption is on the rise in UK businesses and nonprofit sectors. Nearly one in six UK organizations now incorporates AI technologies, and usage in fundraising has jumped from 57% in 2024 to 77% in 2025, signaling broadening applications that enhance competitiveness through automation, personalization, and predictive capabilities.
On the IoT front, the UK market is also experiencing significant growth as businesses increasingly adopt IoT technologies to improve operational efficiency and data-driven decision-making. However, detailed current investment figures were not specified in the available data.
Government policy, under the AI Opportunities Action Plan, underscores a strategic commitment to AI. The plan aims to dramatically increase AI infrastructure capacity by 20 times by 2030 and establish AI Growth Zones to bolster innovation ecosystems, reflecting a broader effort to maintain competitiveness by addressing reliance on foreign infrastructure and enhancing domestic capabilities.
Mobile connectivity is identified as one of the UK's most powerful opportunities to strengthen and grow the economy while improving the lives of the British public. The Autumn Budget includes a £160 million commitment to the development of 5G mobile networks.
However, there is a call for more focus on business competitiveness in the UK's investment in AI and digital technology. Fraser Bell, chief revenue officer of global network provider BSO, urges the Chancellor to boost investment in digital transformation to remain competitive in the global economy.
The government's investment in technology reflects the UK's intent to become a world-leading digital economy. To this end, a £21m fund has been announced to boost regional tech hubs around the country. The Government's investment in technology is expected to contribute an additional £7 billion to the UK economy each year by 2026, according to Telefonica UK's research.
Despite the progress, there is still a significant skills gap that needs to be addressed. Martin Ewings, director of Specialist Markets, Experis, suggests that more needs to be done to close the ever-widening skills gap. The Cyber Discovery programme, a £20 million government initiative, aims to encourage and inspire 15-18-year-olds to enter the cyber security industry, which is expected to have three million unfilled jobs by 2021.
In conclusion, the UK's investment in AI and IoT technologies presents a mixed yet optimistic picture. Despite a decline in overall venture capital, AI remains a robust area of investment, buoyed by strategic government initiatives and widespread sectoral adoption. IoT adoption complements this trend by improving efficiency and connectivity in UK businesses. However, addressing the skills gap and ensuring a focus on business competitiveness are crucial to fully capitalize on these transformative technologies.
- The UK government's commitment to AI, as outlined in the AI Opportunities Action Plan, includes a goal to increase AI infrastructure capacity by 20 times by 2030 and develop AI Growth Zones, indicating a focus on technological advancement in the finance sector.
- As the UK's investment in technology grows, particularly in AI and IoT, there continues to be a need for skilled professionals to support this growth, as indicated by the Cyber Discovery programme's aim to encourage and inspire young people to enter the cyber security industry, a sector projected to have three million unfilled jobs by 2021.
