Ask a graduate of any of the UK’s top universities what their plans for the future look like. Common answers frequently involve working in the services industry, for a long-established corporation, or for the government.
Whether as a teacher, civil servant, or consultant, Britain’s younger population consistently opts for these well-trodden graduate paths. There is good reasoning for this, too. Many graduates seek financial stability and experience with a well-established organisation in their field. However, this leaves less traditional paths unexplored, with UK graduates routinely neglecting entrepreneurship.
One UK graduate job survey concluded that “students want to go down the traditional sector route to learn their trades before branching out.” Across the Atlantic, this is not the same story. As of 2023, the USA had more than 83,000 startups, the number of new ventures dwarfs the UK, which only has a mere 7,600 (approximately). Furthermore, more than 1,600 US startups are “Unicorns” (valued at more than $1 billion), compared to only 175 in the UK. In a sector that is renowned for being inherently risky, why is it that America is so much more willing to take a chance?
One explanation could be down to the quintessentially American fable of hard work leading to success. In other words: “The American Dream.”
The power of the cultural myth that is “The American Dream” was clearly depicted at the inauguration of Donald Trump in January 2025. His front row of spectators included billionaire tech tycoons such as Jeff Bezos (Amazon), Mark Zuckerberg (Meta), Tim Cook (Apple), Sundar Pichai (Google), and of course, Elon Musk (SpaceX, Tesla, X). These companies are all among the top ten largest on the US stock exchange in terms of market capitalisation. The growth in the American economy since the COVID-19 pandemic has been largely thanks to these tech giants. For example, Nvidia’s 900% rise between the start of 2023 and 2025 was by far the greatest contributor to the S&P500’s steady ascent in 2024. This has largely been driven by increasing demand for its chips, which are essential for the development of large-language models (LLMs) and artificial intelligence (AI). All of these behemoth movers of the global economy once began as nascent, ambitious ideas for startups, fostered into power through the culture of entrepreneurship and innovation dominating American industry.
If the startup game is where the greatest innovations and progress are made, then it seems that the USA is playing it a whole lot better than the UK. So why is this the case, and what can we do to close the gap?
The major problems faced by the UK and European economies at present revolve around stagnant growth in recent years. Rachel Reeves, Olaf Scholz, Emmanuel Macron, and others have all come forward in recent months, proclaiming that growth is the answer to our faltering economies and downstream social problems. The main problem we face is that the typical sectors on which these economies were built are traditional and, perhaps, outdated.
Comparing the UK and US’s highest-ranked companies by market capitalisation adds to this worrying story. Whilst the US’s list is dominated by renowned tech giants, the UK’s is made up of an eclectic mix of mining companies, commodities, and consumer goods. The growth prospects in tech are seemingly endless, while a sector like tobacco may be past its peak, and not the long-term strategy for success most investors are looking for.
Mainland European nations face similar problems. With their heavy reliance on traditional or mature industries, Europe’s prospects do not seem forward-facing. In addition, Europe puts itself in a more difficult position by shielding its major companies from international competitors, hence discouraging innovation or dynamism. A pressing example of this has been the uptake of Chinese electric vehicles (EVs), which have been met with steep tariffs in Europe. While there are understandable social and political reasons for this, it is their national economies that ultimately suffer.
Since 2019, the French car giants Peugeot, Renault and Citroen have all lost market share in Western Europe, and now face huge competition from the emerging Chinese EV sector. Italian economist and politician Mario Draghi furthered this sentiment, as he outlined in his 2024 Draghi Report that the EU continues to add regulatory burdens to European companies, hindering their growth in a way that the US does not. He stressed that Europe’s biggest goal must be to “close the innovation gap with the US and China,” and that its “lack of dynamism is self-fulfilling.” This is all before we consider Europe’s ageing population, current political uncertainty, and government deficits, all of which further slow progress and the pace of technological innovation. I fully admit that there is a whole lot more to life than pure capitalist technological innovation. However, in a world where tech giants such as Musk are increasingly influential in international politics, being left behind by America would do Europe’s political position on the global stage no favours.
Another crucial part of the puzzle in the startup ecosystem is funding. The largest Venture Capital (VC) fundraising and backing in the world happens in the USA. In the first quarter of 2024, over $44.5 billion was invested in American startups, compared to the $3.9 billion raised by those in the UK.
This gap only seems to be widening. Leading VC firm; Andreessen Horowitz (a16z) announced the closure of their London office in January 2025, citing efforts to refocus on the American market. Not only are the sums of capital larger in the US, but there are also more startups. This creates a cycle of investment where funding attracts startups, and quality startups attract growing funding.
A far smaller UK market means they cannot compete with American VCs, forcing UK-based startups to look abroad for funding. One Cambridge University spinout, Zinwave, has relocated its operations to Dallas, Texas. A key reason the company cited for the move was how the area is “a centre of enterprise activity and home to more than 20 Fortune 500 companies”. Reduced innovation, reduced taxation benefits, and reduced excitement around building new ideas are all downstream consequences of this entrepreneurial brain drain for the UK Government.
The UK government has talked about addressing this problem for years. The underutilised resources of technical expertise and the advantage of having some of the world’s leading researchers are thought to be a key part of increasing growth.
In recent days, Labour Chancellor Rachel Reeves has confirmed funding for the project in a bid to create what she calls the “Oxbridge growth corridor.” This is not a brand new idea: connecting Oxford, Milton Keynes, and Cambridge has been a topic of discussion for at least 20 years. Reeves believes the project has the potential to add up to £78 billion to the UK economy and could be regarded as “Europe’s Silicon Valley.” Reeves’ goal is to improve connectivity and affordability across the region by upgrading transport links, infrastructure, and affordable housing to reduce the “supply side constraints on economic growth in the region.”
The proposed project area contains two world-leading universities and is home to 5 F1 teams (6 if you count McLaren based just outside of London) – demonstrating the presence of world-class technical expertise. Mobilising the region’s resources and knowledge is not impossible, but this takes time, money, and commitment from those in charge. Renewed focus on the corporate potential of the south of England does not aid the political problem of the UK’s regional inequality. Nevertheless, it is a much-needed economic policy step and is an essential part of this Labour government’s plans to kickstart a stagnant economy.
This will not come without competition, however. American initiatives still have the advantage of being in a market used to fast-paced and well-funded innovation. Trump’s ‘Stargate’ project is expecting an investment of up to $500 billion in the future of AI infrastructure. The UK and EU may need to act fast before the ladder is pulled from underneath them and they are left too far behind the US to catch up.
It is not too late for the UK and EU in this regard. They both face economic stagnation that has arguably contributed directly to much of the political and social instability in the region. Growth is the preferred answer that many economists and policymakers are turning to. This takes investment and speed with the knowledge that there will be mistakes in this transition.
Shedding the cultural aversion to risk and embracing the opportunities that follow with innovation and investment are the next steps. Labour and governments across the EU must look to take up a more open-minded approach to risk and innovation if they wish to close the widening gap between them and Trump’s corporate America. Reeves’ proposed plan for increasing connectivity and partnership between Oxford, Cambridge and Milton Keynes is a promising first practical step to improving innovation in the UK. However, seeing it through to its full potential and rivalling the American startup culture is a mammoth task.