Experts Share: Could AI Help Reverse The UK’s Scaleup Decline?

You’d think that the hardest part when it comes to business is starting, but that doesn’t seem to be an issue in the UK. In fact, more new companies keep opening around the country every year. The thing that is proving to be hard here is going to startup to scaleup, because businesses are finding it hard to grow from there.

Take these numbers, for example: sharetech platform Vestd used data from the ONS that found there were 128,760 scaleups across the UK in 2025 compared to 128,960 in 2024 and 129,080 in 2023. This can be seen in most of the UK – Scotland, Wales and Northern Ireland all recorded fewer scaleups than a year earlier. England was the only place where the total went up, even though the increase was only 0.01%. London also recorded a 1.73% increase, which would make it the only English region where the number of scaleups came up over the last year.

Why Are More Startups Not Becoming Scaleups, Though?

The research says that the stagnancy only comes after starting a business up, when companies need funding, experienced staff and the right ownership structure to keep growing, which helps explain this contrast in the data: the overall UK business population went from 2,726,830 in 2023 to 2,734,620 in 2025, according to the ONS data analysed by Vestd.

Vestd also brought up findings from a recent survey showing that only 14% of founders believe the UK is an easy place to scale a business. So, again, there are many entrepreneurs are launching companies, but many are finding it much harder to grow them into larger businesses.

Ifty Nasir, Founder and CEO of Vestd, said, “Our findings on the decline of scaleups over the last year are particularly concerning, as fewer businesses successfully scaling can translate into fewer employment opportunities, reduced regional investment, and an overall less dynamic entrepreneurial landscape.

“However, businesses can take practical steps to support their next stage of growth, from securing investment to attracting talent and structuring ownership effectively.”

Can AI Help Startups Transition Into Scaleups?

Since AI has become such a high priority in the UK, it’d be interesting to see whether that could be what helps businesses scale. I’ve asked experts what they think, and this is what they say…

Our Experts:

• Aidan van Vuuren, Head of Digital, Peak Digital
• Jason Tassie, Founder, Know Your Business
• Jessica Maccio, Digital PR Consultant, JessicaMaccio.com
• James Ryan, Co-Founder, Bacqd
• Jenson Brook, Founder, Britain’s Got Startups
• Lukas Kaminskis, CEO, Turing College
• Jeff Barrington, Managing Director, Windsor Drake
• Juan Mathews Rebello Santos, Cybersecurity Researcher, Founder, BNVD.org

Aidan van Vuuren, Head of Digital, Peak Digital

“The UK’s startup engine is working fine, it’s the next stage that’s stalling. Founders can get seed and Series A funding without much trouble, but the follow-on rounds that turn a promising startup into a genuine scaleup have dried up, and investors are pricier and slower with due diligence than they used to be. That pushes founders to prove profitability far earlier than the previous generation of scaleups had to.

“This is where AI can actually move the needle, though not by fixing the funding gap directly. It collapses the cost of scaling operationally. Marketing, customer support, content production and data analysis that used to require headcount can now be run by much smaller teams using AI tools. That means startups need less capital to hit the same revenue milestones, so they’re less dependent on funding rounds (which have started to dry up).

“The scaleups who get this right won’t be the ones with the flashiest AI features. They’ll be the ones using it to stretch a small team’s output further, buying themselves runway to hit growth numbers on their own terms rather than chasing the next round.”

Jason Tassie, Founder, Know Your Business

“I don’t think that the UK is struggling to create startups, it’s struggling to help them become scaleups.

“Starting a business has never been more accessible, there is a lot of support on offer but building one from 10 people to 100 people remains incredibly difficult. Founders often hit barriers around hiring, cashflow, regulation and operational complexity long before they run out of ideas. That’s why we’re seeing healthy startup numbers but fewer businesses making the leap into sustainable, high-growth companies.

“AI has the potential to change that because it dramatically lowers the operational cost of a business scaling.

“Five years ago, growing a business often meant hiring layers of management and support staff. Today, AI can help small teams deliver customer support, marketing, financial analysis, software development and administrative tasks that previously required several additional employees. That allows founders to scale revenue faster without costs rising at the same pace.

“However, AI isn’t a silver bullet. The businesses that will benefit most are those using AI to remove bottlenecks rather than simply automate existing processes.

“Scaleups succeed by building systems that can grow without the founder being involved in every decision. AI can accelerate that transition, but it still requires strong leadership, clear strategy and a willingness to redesign how the business operates.”

Jessica Maccio, Digital PR Consultant, JessicaMaccio.com

“Scaleups have historically been defined as companies with 20 – 249 employees, and most founders I speak to are both launching and scaling as lean as possible. So businesses aren’t failing to grow, but they are not chasing a huge headcount and that seems to be a rational choice instead of a failure.

“We’ve got to consider that employing staff has become much more expensive over the past few years, coinciding with AI making it much easier to add to turnover without adding extra employees. So I think it isn’t a case of scaleup decline, but more that we need to redefine what a scaleup is in 2026.

“I don’t think AI will reverse the decline directly, but it can lower the risk for founders who are testing new products, markets or channels, as it’s far cheaper than it used to be. I’ve spoken to founders who can easily make changes to their own app using AI, without hiring more developers, for example. It will be interesting to see the impact of this, as what’s always most important is that the business has something worth scaling in the first place.”

James Ryan, Co-Founder, Bacqd

“We’re not short of startups in the UK. We’re short of businesses successfully making the leap from promising company to category leader.

“Over the last few years it’s become easier than ever to start a business. AI has dramatically lowered the cost of building products, creating brands and getting to market. That’s fantastic for entrepreneurship, but it doesn’t solve the much harder challenge of scaling.

“Scaleups don’t fail because they can’t generate ideas. They struggle because growth demands operational discipline, repeatable sales, leadership capability, access to capital and the ability to execute consistently as complexity increases. AI can’t replace those fundamentals.

“Where AI can change the equation is by giving ambitious scaleups capabilities that were previously only available to much larger organisations. A company of 50 people can now operate with the insight, automation and decision-making support that once required teams of hundreds. That has the potential to improve productivity, accelerate international expansion and make UK businesses more attractive to investors.

“The companies that benefit won’t be the ones simply ‘using AI’. They’ll be the ones redesigning how they operate around it. AI should be viewed as infrastructure for growth, not another software tool.

“If the UK wants to reverse the decline in scale-ups, we need to stop thinking about AI as just another technology trend and start treating it as a driver of competitiveness. Alongside better access to growth capital and stronger support for founders, AI has the potential to become one of the biggest catalysts for helping more British businesses scale globally.

“At bacqd, we’ve already seen this in action through our work with Atheni.AI, founded by two exceptional women entrepreneurs. Rather than building another AI model, Atheni helps people and organisations unlock measurable value from the AI tools they already have, including ChatGPT, Claude, Gemini, Microsoft Copilot and Perplexity by enabling them to use these technologies effectively, confidently and strategically.”
 

Jenson Brook, Founder, Britain’s Got Startups

“Currently, most startups use AI to improve efficiency rather than drive new growth. While AI enables teams to achieve more with fewer resources, efficiency alone does not transform a startup into a scaleup. Growth still relies on capital, talent, and the capacity to enter new markets.

“The UK doesn’t necessarily have a startup problem; it has a capital allocation problem.

“AI is exposing, rather than resolving, the UK’s challenges in scaling startups. Although AI-driven businesses are increasing, the core issues remain. Founders continue to face barriers such as limited access to later-stage capital, higher hiring costs, and a funding ecosystem that lags behind innovation, especially outside London.

“AI may also worsen existing imbalances. Investment is concentrated in a few leading companies and established hubs, while regional scaleups remain underfunded, even though they represent most high-growth businesses.

“AI can help UK companies scale faster and compete globally at an earlier stage, but it cannot address structural gaps in funding and support. Until these issues are resolved, the UK will continue to produce ambitious startups. Initiatives that redirect capital and attention beyond London are essential to building a true national scaleup economy.”

Lukas Kaminskis, CEO, Turing College

“The UK’s scaleup problem has traditionally been seen as a shortage of funding and skilled people. Growing businesses have often struggled to access enough capital or recruit the talent they need. AI could change that by helping companies do more, grow faster and operate with smaller teams – a potential that is not yet fully understood.

“As a business, we have doubled the number of engineering tasks we complete and release each week – including bug fixes, new features and technical improvements – since integrating AI into our development work.

“We have also significantly increased our marketing output without adding headcount and built internal tools, including an advertising-generation system and an AI admissions interviewer, that have saved us close to £100,000. In some areas, we have quadrupled the revenue generated by our go-to-market activity.

“We simply have not needed to hire some of the roles we would have recruited for 18 months ago.

“That is the real opportunity for scaleups. Growth used to require companies to increase headcount at roughly the same rate as revenue. Hiring is slow, expensive and risky, and it is often where promising UK startups stall. AI loosens that link by enabling smaller teams to achieve more. A ten-person company can now plausibly achieve what might have required 30 people three years ago.

“I would be careful about calling AI a silver bullet, though. We take three risks seriously, and they could just as easily stall a scaleup as help one.

“Governance is the quiet risk. Many businesses use AI tools without a clear policy on what data can be entered, who owns the outputs or how decisions are audited. That can remain invisible until it becomes a compliance or reputational problem.

“Overreliance is more nuanced. The risk is not simply that people use AI too much, but that they lose the ability to judge whether its output is any good. The skill that matters is not just prompting; it is knowing the subject well enough to recognise when the model is wrong.

“Tokenomics is also underappreciated. Companies are building core workflows around API pricing that can change quickly, while model providers can alter prices or withdraw models altogether. A business that embeds AI deeply into a critical process without planning for costs to double, or for a model to disappear, has taken on a dependency risk it may not have fully considered.

“AI can help reverse the UK’s scaleup decline, but only for companies that pair it with proper governance, genuine domain expertise and a clear understanding of the risks. Without those foundations, AI may help a business grow faster, but not necessarily more sustainably.”

Jeff Barrington, Managing Director, Windsor Drake

“This is not a startup problem, it is a capital and exit problem. The UK is excellent at forming companies and weak at funding them through the middle. Only about 7% of seed-funded startups reach institutional scale-up capital, and more than 80% of the growth money that does appear comes with an overseas investor attached. So scale-ready companies stall, raise abroad, or get acquired early, often by US strategics, before they ever become independent scaleups. That is the same pipe draining London’s public market.

“AI helps, but it is a tailwind, not a cure. It does let companies scale on less. UK founders already run about 2.5 times leaner than US peers, and AI pushes that further, so a startup can reach more revenue per pound raised, which softens the funding gap. UK AI startups also raised $7.9 billion last year, a third of all UK venture capital.

“But the scaleup gap is structural. AI does not create domestic growth capital, and it does not change an exit market that rewards selling early. If anything, an AI-capable company becomes an attractive acquisition sooner, so it can get bought before it scales. AI makes UK companies easier to scale. It does not fix the reasons they don’t.”

Juan Mathews Rebello Santos, Cybersecurity Researcher, Founder, BNVD.org

“The UK produces more AI startups per capita than any European country, but sells most of them to US buyers before they reach 250 employees. Thats not a technology problem, its a cost of scaling problem. The compliance, security, infrastructure, and talent overhead between Series A and Series B crushes UK founders because they lack the cheap capital their US competitors have.

“AI compresses that overhead directly. Automated compliance tooling, AI driven security operations, and agent based customer support let a UK team of 40 operate like a US team of 120. At BNVD.org we track vulnerability disclosure patterns across scaleups, and the data shows that UK companies spending on AI security tooling reach SOC 2 certification 60% faster than those using traditional methods.

“Thats months shaved off the sales cycle with enterprise customers. The real opportunity isnt just adopting AI, its that the UK can leapfrog the legacy infrastructure problem. New AI native scaleups dont need to build the same compliance and security stacks that slowed previous generations. They can deploy AI agents that handle vendor risk assessments, continuous monitoring, and incident response from day one.

“The government should create a regulatory sandbox exempting AI native scaleups from new AI regulation until they cross 500 employees, giving them the runway to grow rather than selling early to avoid uncertainty.”