Why is London losing its edge as a global tech hub?

• With new restrictions on immigration, many tech companies face difficulties in hiring and retaining the international workforce that has driven their innovation.
• Access to EU funding and research programs has become more complicated, potentially reducing the resources available to London-based startups and research institutions.
• US cities beyond Silicon Valley, including Austin and Boston, are emerging as attractive alternatives for tech companies and investors due to lower costs and quality of life.

London has long been celebrated as one of the premier global technology hubs, attracting talent, investment, and innovation from around the world.

Its reputation as a centre for financial technology, artificial intelligence, and startups has placed it in the same league as cities such as Silicon Valley, New York, and Berlin.

However, recent trends and challenges have led to questions about whether London is beginning to lose its competitive edge in the rapidly evolving global tech landscape.

According to Dealroom’s 2025 global tech ecosystem Index, issued recently, Paris has overtaken London as Europe’s leading tech hub for the first time, reigniting concerns over the competitiveness of the UK’s biggest city for a vital sector.

The French capital has been named as the only non-US city in the world’s top five global ecosystems, overturning years of consistent outperformance by London.

Despite raising more venture capital than Paris in recent years, London’s tech firms saw a smaller gain in enterprise value, the report found between 2017 and 2024, and the total enterprise value of Paris tech firms grew just over fivefold, outpacing London’s 4.2 times over the same period.

Paris’s AI sector is emerging as a particularly powerful force, with nearly half of the city’s $7.8 billion in funding last year going to AI, including standout rounds from Mistral AI, Poolside, and Electra.

Impact of Brexit

One of the primary factors contributing to concerns about London’s status is the impact of Brexit. The United Kingdom’s decision to leave the European Union has introduced new barriers to talent mobility, funding, and collaboration.

Historically, London’s strength as a tech hub has been closely linked to its ability to attract skilled professionals from across Europe and beyond. With new restrictions on immigration, many tech companies face difficulties in hiring and retaining the international workforce that has driven their innovation.

Additionally, access to EU funding and research programs has become more complicated, potentially reducing the resources available to London-based startups and research institutions.

Cost: Another issue

Another challenge for London is intensifying global competition. Cities around the world are aggressively investing in technology infrastructure, innovation ecosystems, and talent acquisition.

For example, cities in Asia, such as Singapore and Shenzhen, have rapidly developed their tech sectors with strong government support and favourable regulatory environments.

Similarly, US cities beyond Silicon Valley, including Austin and Boston, are emerging as attractive alternatives for tech companies and investors due to lower costs and quality of life. As other cities rise, London must innovate continuously to maintain its attractiveness.

Cost is also an increasingly significant issue. London’s rising living expenses and soaring commercial rents put pressure on startups and even established tech firms, making it challenging to scale operations sustainably.

The high cost of living can also deter young talent and entrepreneurs, who might prefer to relocate to more affordable cities while still seeking access to vital networks and capital.

Despite these challenges, London retains several intrinsic advantages that could help it bounce back or maintain a strong position. It continues to be a global financial centre, offering unparalleled access to venture capital and financial services expertise.

The city’s universities and research institutions remain world-class, producing a steady stream of highly skilled graduates and cutting-edge research. Moreover, London benefits from a diverse, multicultural population, which fuels creativity and global perspectives essential in technology innovation.