Region ripe for AI-led growth but more needs to be done to support investment – report
The West Midlands must prioritise AI investment in manufacturing and engineering businesses if the region’s tech sector is to reach its target of achieving a £100billion valuation by 2030, according to a new report released by UKTN and KPMG.
Gathering the views of senior business leaders from across the region, the report highlights the need to secure more capital funding to power new AI ventures and innovation in the sectors that have been long-standing drivers of growth.
AI-enablement in the Midlands’ industrials sector alone has the potential to grow the region’s economy by £9billion by 2035.
With one of the most vibrant and fast-growing tech sectors in the UK, the West Midlands has a growing cluster of over 300 specialist AI businesses, employing more than 11,000 people.
But even with the surge in investor interest in AI bringing cash to startups across the country, the West Midlands has struggled to secure its share.
The report finds that AI founders in the West Midlands are increasingly frustrated that many of the accelerator and support programmes that nurture growth on a global scale disproportionately benefit firms based in London.
Businesses like Birmingham’s Lexverify – an AI-powered risk management platform – which raised £900,000 in seed funding earlier this year, have secured far less capital than equivalent startups in London, highlighting a pressing need for more investment outside of the capital.
The UKTN report also found that the West Midlands is a strong secondary location for South-headquartered AI firms who want to leverage the region’s position as a manufacturing and engineering hub.
These firms contribute substantially to the region’s economy by bringing jobs to the Midlands.
However, business leaders cited the need for further government grants and investment funds to specifically target locally-led AI projects that would encourage growth in start-ups and small businesses.
Andrew Bostock (pictured), Birmingham office senior partner at KPMG UK, said: “The West Midlands has and will continue to be a byword for growth, jobs, development and innovation – now with an ambition to become the UK’s best when it comes to digital skills.
“The focus on upskilling our workforce through innovation and technology has come at the same time as one of the sectors’ biggest stories – the rise of AI – which has brought transformational efficiency and productivity benefits for businesses across the globe.
“This report showcases the great work that has already been done but we cannot standstill – we have to strive for growth and investment to ensure the West Midlands remains at the heart of using AI to drive digital and tech innovation.”
Oscar Hornstein, senior reporter at UKTN, said: “The West Midlands has been rapidly developing the maturity of its tech industry, from the automotive industry sector to fintech and climate tech.
“However, no subsector is more in demand right now than AI. UKTN’s research has found that while there is a solid basis for AI success in the region and a clear appetite from founders and local government to do more, the West Midlands, unfortunately lags behind other regions in the UK.
“There are plenty of promising companies using AI for all manner of purposes in the area, however, to truly advance the West Midlands’ AI prowess, there must be a greater emphasis on AI skills development and a better route to secure funding for its companies.”
