Why Brussels can no longer afford to exclude London from the technology battle

When the United Kingdom left the European Union, the separation was negotiated primarily through the language of trade, regulation and market access. Six years later, technology is exposing the limits of that framework. In artificial intelligence, quantum computing, biotechnology and semiconductors, Europe is discovering that it can hardly strengthen its technological sovereignty while continuing to fragment its own scientific and financial ecosystem.

The prospect of the United Kingdom gaining access to the European Union’s startup investment mechanisms is a discreet but revealing sign of this shift. According to the Financial Times, London and Brussels have discussed British participation in the European Innovation Council Fund, the EU’s deeptech investment vehicle, which has more than €4 billion under management.

The negotiations remain politically sensitive. France and several other member states have reportedly requested safeguards concerning British participation, particularly in the new €5 billion Scaleup Europe Fund. The disagreement is less about whether cooperation is desirable than about its conditions: how much London should contribute, how much British companies could receive and whether access to European capital should become part of a broader post-Brexit settlement.

Behind these technical questions lies a more consequential debate. Can Europe build a credible technology strategy without its largest venture capital centre?

Despite Brexit, the United Kingdom remains Europe’s leading market for startup investment. According to Dealroom, British technology companies raised $23.7 billion in 2025, the highest total on the continent. London also concentrates a substantial share of Europe’s funds specialising in artificial intelligence, fintech and deeptech.

The country continues to produce some of the continent’s most strategic technology assets. DeepMind remains one of the world’s most influential artificial intelligence laboratories. Arm occupies a central position in the semiconductor industry, with architectures used across smartphones, connected devices and an increasing number of data-centre processors. Wayve raised $1.05 billion in 2024 from investors including SoftBank, NVIDIA and Microsoft to develop its autonomous-driving technology. Synthesia has become one of Europe’s most visible enterprise generative AI companies, while Quantexa is expanding its decision-intelligence platforms across banks and public administrations.

London therefore remains one of the few European ecosystems where fundamental research, international talent, specialist capital and late-stage technology companies coexist at scale.

For Brussels, the question is increasingly industrial rather than merely institutional. The capital requirements of strategic technologies have changed considerably. Training AI models, building computing infrastructure, financing data centres or industrialising quantum and biotechnology platforms now demands sums that increasingly resemble infrastructure financing rather than traditional venture capital.

Europe’s weakness is particularly acute at the growth stage. The continent produces a large number of research projects and early-stage companies but remains less effective at financing the rounds required to turn them into global industrial leaders. The European Commission itself identifies the shortage of growth capital as one of the main reasons European companies seek funding, relocate or eventually sell to investors outside the continent.

This dependence is already visible. Mistral AI has attracted backing from US investors including Andreessen Horowitz and Lightspeed Venture Partners. Helsing, one of Europe’s most highly valued defence technology companies, has also relied on an international investor base to finance its expansion.

Foreign capital is not, in itself, a problem. The strategic risk arises when European companies have no credible alternative to it and when financing gradually determines where their intellectual property, decision-making centres and industrial capabilities are located.

Brussels is therefore trying to avoid a double divergence: continental startups turning primarily to the United States for growth capital, while the United Kingdom becomes even more closely integrated into the American technology and financial ecosystem.

The British return to Horizon Europe in January 2024 was a first response. With a current indicative budget of €93.5 billion for the 2021–2027 cycle, the programme connects universities, laboratories, companies and public research organisations across Europe. British entities can once again participate in most calls under conditions similar to those applying to organisations based in EU member states.

The next step concerns equity. The existing EIC Fund, capitalised at more than €4 billion, invests directly in deeptech startups. The new Scaleup Europe Fund is intended to address larger financing rounds, generally above €100 million. Managed by EQT and backed by a €1 billion commitment from the European Commission alongside institutional investors, it is targeting approximately €5 billion and is expected to begin investing in autumn 2026. European Commission

Its objective is explicit: to give strategic European companies the option of scaling from Europe rather than leaving the continent once they enter their most capital-intensive phase.

The concern is hardly theoretical. Graphcore, once described as Britain’s answer to NVIDIA in AI processors, was acquired by SoftBank in 2024 after encountering financial difficulties. Darktrace was purchased by the US private equity firm Thoma Bravo. DeepMind has been owned by Google since 2014.

These transactions followed different industrial and financial trajectories, and an acquisition does not necessarily amount to the disappearance of the underlying European capabilities. Together, however, they illustrate a recurring pattern: Europe is capable of producing advanced research and promising companies, but struggles to retain control of them once their financing requirements increase.

This is why maintaining a rigid boundary between London and the continental ecosystem is becoming economically costly. Keir Starmer’s government has pursued a more pragmatic relationship with Brussels, while European institutions increasingly regard research, capital and industrial capacity as inseparable components of technological power.

Yet the debate over British access also reveals that rapprochement will not be automatic. Several member states want guarantees that European public capital will strengthen the continent’s industrial base rather than merely extend the financing reach of the City. London, for its part, will be reluctant to contribute without meaningful access for British companies.

European digital sovereignty was initially expressed largely through regulation: the GDPR, the Digital Markets Act, the Digital Services Act and the AI Act. Brussels is now adding a second pillar based on investment, research infrastructure and industrial scale.

That shift makes cooperation with the United Kingdom increasingly logical, but not unconditional. The real question is no longer whether Europe can afford to work with London. It is whether the two sides can design a framework in which British capital and research reinforce European technological capacity without recreating, through public financing, the dependencies they are jointly trying to reduce.