France and Britain are battling it out for Europe’s A.I. crown
U.K. Prime Minister Rishi Sunak and French President Emmanuel Macron.
Kin Cheung | Pool | Getty Images
LONDON — Two countries are jockeying for position as Europe’s capital for artificial intelligence.
Both French President Emmanuel Macron and British Prime Minister Rishi Sunak have made bold statements about AI in recent weeks, as each tries to claim a stake in the highly hyped market.
“I think we are number one [in AI] in continental Europe, and we have to accelerate,” Macron told CNBC’s Karen Tso at France’s annual tech conference Viva Tech on June 18, while Sunak pitched the U.K. as the “geographical home of global AI safety regulation” at the London Tech Week conference on June 12.
AI is seen as revolutionary and therefore of strategic importance to governments around the world.
Hype around the technology has been partly sparked by the viral nature of Microsoft-backed OpenAI’s ChatGPT. It has also been the source of tech tensions between the U.S. and China as countries around the world try to harness the potential of the most critical technologies.
So, who is leading the race to take Europe’s AI crown?
Money matters
At VivaTech in Paris, Macron announced 500 million euros ($562 million) in new funding to create new AI “champions.” This comes on top of previous commitments from the government, including a promise to pump 1.5 billion euros into artificial intelligence before 2022, in an attempt to catch up with the U.S. and Chinese markets.
“We will invest like crazy on training and research,” Macron told CNBC, adding that France is well-positioned in AI due to its access to talent and startups forming around the technology.
In March, the U.K. government pledged £1 billion ($1.3 billion) to supercomputing and AI research, as it looks to become a “science and technology superpower.”
As part of the strategy, the government said it wanted to spend around £900 million on building an “exascale” computer capable of building its own “BritGPT,” which would rival OpenAI’s generative AI chatbot.
However, some officials have criticized the funding pledge, saying it’s not enough to help the U.K. compete with titans like the U.S. and China.
“It sounds great but it’s nowhere near where we need to be,” Sajid Javid, a former government minister in ex-PM Boris Johnson’s cabinet, said in a fireside discussion at London Tech Week.
Policing A.I. abuses
One big difference between the U.K. and France is how each country is opting to regulate artificial intelligence, and the laws already in place that affect the quick-moving technology.
The European Union has its AI Act, which is set to be the first comprehensive set of laws focusing on artificial intelligence in the West. The legislation was approved by lawmakers in the European Parliament in June.
It assesses different applications of AI based on risk — for example, real-time biometric identification and social scoring systems are considered as posing “unacceptable risk,” and are therefore banned under the regulation.
France will be under direct jurisdiction of the AI Act, and it would be “unsurprising” if the relevant French regulator, either the CNIL or a new, AI-specific regulator, took an “aggressive approach” to its enforcement, according to Minesh Tanna, global AI lead at international law firm Simmons & Simmons.
In the U.K., rather than issue AI-specific laws, the government launched a white paper advising various industry regulators on how they should enforce existing rules on their respective sectors. The white paper takes a principles-based approach to regulating AI.
The government has touted the framework as a “flexible” approach to regulation, which Tanna described as more “pro-innovation” than the French method.
“The UK’s approach is driven, in a post-Brexit world, by a desire to encourage AI investment,” he added, which gives the U.K. more “freedom and flexibility to pitch regulation at the appropriate level to encourage investment,” he said in an email to CNBC.
In contrast the EU’s AI Act could make France “less attractive” for investment in artificial intelligence given that it lays down “a burdensome regulatory regime” for AI, Tanna said.
Who will win?
“France definitely has a chance to be the leader in Europe, but it faces stiff competition from Germany and the U.K.,” Anton Dahbura, co-director of the Johns Hopkins Institute for Assured Autonomy, told CNBC via email.
Alexandre Lebrun, CEO of Nabla, an AI “copilot” for doctors, said the U.K. and France are “probably even” when it comes to attractiveness for starting an AI company.
“There’s a good talent pool, strongholds like Google and Facebook AI research centers, and a reasonable local market,” he told CNBC, but he warned that the EU AI Act would make it “impossible” for startups to build AI in the EU.
“If at the same time the U.K. adopts a smarter law, it will definitely win against EU and France,” Lebrun added.
At the same time, London has been the source of a lot of doom and gloom from some corners of the industry, who’ve criticized the country for being an unattractive place for tech entrepreneurs.
Keir Starmer, the leader of the opposition Labour party, told attendees at London Tech Week that a series of political crises in the country has dented investor sentiment on tech generally.
“Many investors say to me we are not investing in the U.K. right now because we don’t see the conditions of certainty politically that we need in order to invest,” Starmer said.
Claire Trachet, CFO of French tech startup YesWeHack, said the U.K. and France both have potential to challenge the dominance of U.S. AI giants — but it’s just as much about collaboration across Europe as it is competition between different hubs.
“It would require a concerted and collective effort of European tech superpowers,” she said. “To truly make a meaningful impact, they must leverage their collective resources, foster collaboration, and invest in nurturing a robust ecosystem.”
“Combining strengths — particularly with Germany’s involvement — could allow them to create a compelling alternative in the next 10-15 years that disrupts the AI landscape, but again, this would require a heavily strategic vision and collaborative approach,” Trachet added.
The U.K. and Germany are emerging as key hubs for a new wave of AI defense startups, as Europe scrambles to rearm amid rising geopolitical tensions.
Private funding for defense startups across the region has ramped up in recent years, with investors looking to tap into increasing government military budgets, driven by the ongoing Russia-Ukraine war and pressure from the Trump administration.
But it’s ecosystems in the U.K. and Germany that are seeing the most activity. The majority of the biggest rounds across the sector have been for startups based in those two countries, with both emerging as key launchpads into new markets and battlefield training.
David Ordonez, senior associate at NATO Innovation Fund, told CNBC that this was “thanks to the scientific expertise of their talent base, national commitments to treat this sector as an economic engine for growth and a manufacturing base that enables the rapid scaling of breakthrough innovation.”
‘Visible pathways to procurement’
Venture capital for European defense startups has spiked as members of the NATO military alliance have agreed to increase security spending to 5% of gross domestic product, and defense departments in London and Berlin have increasingly signaled a willingness to adopt new technology built by younger players in the market.
Investors, buoyed by the promise of commercial deals, have funneled a record $4.3 billion into the sector since the start of 2022, according to Dealroom — nearly four times the funds deployed in the previous four years.
Germany’s AI drone makers Helsing and Quantum Systems hit valuations of 12 and 3 billion euros this year, respectively, after rounds worth hundreds of millions of euros. In the U.K., manufacturing platform PhysicsX, which works with defense companies, raised $155 million this year, and missile interception startup Cambridge Aerospace reportedly picked up a $100 million round in August.
The U.K. government’s Strategic Defence Review in June proposed boosting spending on novel tech and streamlining procurement processes, as well as unveiling a £5 billion tech investment package.
“We see a system increasingly open to non-traditional primes, supported by wider investment in skills and technology,” Karl Brew, head of defense at Portuguese-U.K. drone startup Tekever, told CNBC.
Tekever, which became a unicorn this year, announced a major contract to supply uncrewed aerial systems to the Royal Air Force in May. Helsing has several contracts with the U.K. government, and U.S.-based Anduril signed a £30 million contract for its attack drones in March.
Tekever’s AR3 EVO drone undergoing pre-flight checks prior to being launched. Credit: Tekever
Germany announced its defense spending would rise to upwards of 100 billion euros — a record figure since the German reunification — from 2026, and also changed procurement processes to make it easier for startups to participate.
While most European governments have ramped up defense spending, Germany stands out as having “visible pathways from prototype to major procurement [for startups] that many other European markets still do not provide,” Meghan Welch, managing director at financial advisory firm BGL, told CNBC.
Helsing and attack drone startup Stark are both in line to win a contract for kamikaze drones, the Financial Times reported in October. Helsing and Stark declined to comment to CNBC about this.
Legacy infrastructure
Germany’s industrial heritage has also created talent pipelines and infrastructure that startups are tapping into.
“Germany has the industrial base, the infrastructure and the technical talent to produce the next-generation technologies NATO urgently needs,” Philip Lockwood, international managing director of Stark, told CNBC.
Founded in 2024, Stark is building attack and reconnaissance drones and has raised $100 million from investors, including Sequoia Capital, Peter Thiel’s Thiel Capital, and the NATO Innovation Fund.
Stark’s Virtus drone
“Many of Europe’s best engineers developed their expertise in Germany’s industrial and technological sectors, which have long led in hardware, software, manufacturing and supply-chain resilience,” Lockwood said.
The U.K.’s broader ecosystem is also a decisive factor in its appeal as a defense base, said Tekever’s Brew. “It brings together world-class universities and R&D centres with a dense network of aerospace, software and advanced-manufacturing suppliers,” he said.
Launchpads
Another key driver of defense tech in the U.K. and Germany is that both countries serve as launchpads into new markets or frontline training.
The U.K. has had a security and defense partnership with Australia and the U.S. since 2021, known as AUKUS, which has lifted certain export controls and restrictions on technology sharing between the nations.
“As part of AUKUS, the move into the UK was a natural entry point into Europe,” Rich Drake, managing director at Anduril UK, told CNBC.
Alongside signing contracts totalling nearly £30 million for its attack drones earlier this year, Anduril also has plans to open a new manufacturing and R&D facility in the UK.
Anduril UK’s Seabed Sentry. Credit: Anduril UK
“[AUKUS] allows us to work with the MOD [Ministry of Defence], align on operational needs and accelerate the deployment of leading autonomous systems in a context where trust, shared priorities and strategic alignment matter as much as technology,” Drake said.
U.S. defense startups looking to sell into European markets have also often chosen London as a base from which to expand across the region. Second Front Systems and Applied Intuition expanded into the country in 2023 and 2025, respectively.
“Given the history of the special relationship between the US and the UK, the UK serves as an excellent launching pad into the rest of the European market,” said Enrique Oti, chief strategy officer at Second Front Systems.
The U.K. can also serve as a base for European defense startups with global ambitions, added Dmitrii Ponomarev, product manager at VanEck.
“In practice the UK is becoming the interoperability testbed and politically acceptable landing zone for tech flowing in both directions,” Ponomarev told CNBC.
“If you can win a pilot with UK forces, comply with UK/US-aligned security and export regimes and operate in English with UK industrial and legal standards, you look much more ready to US primes, Department of War programs and AUKUS-related efforts.”
In 2025, some of Europe’s best-funded defense startups, including Helsing, Quantum Systems and Stark, announced factories, offices, or investments in the country.
Further east, Germany’s role as one of the largest donors of military aid to Ukraine has given the country’s startups a “front row seat for battlefield feedback,” said Ponomarev.
Quantum Systems has deployed its reconnaissance tech in Ukraine and Helsing announced in February it would produce thousands of strike drones for the country.
Despite the advances, analysts, investors and startup execs all caution there’s more work to be done to create the conditions for building global defense startups in the UK and Germany.
“Scaling remains difficult without continued political and procurement reform,” Ponomarev told CNBC.
“The UK still struggles with slow procurement cycles, clearance bottlenecks and a shortage of security-approved technical talent,” he added. Germany’s biggest obstacles are bureaucracy, strict export controls and heavy dependence on a single customer — the country’s armed forces, Ponomarev added.
BLG’s Welch said the winners of Europe’s AI defense boom “are likely to be companies that can master both the political economy, including export rules, alliances and public narratives, and the technology race, positioning themselves as enablers of national sovereignty rather than disruptors of it.”
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