UK and US Forge £31 Billion Tech Pact Amid Economic Concerns

The United Kingdom has entered a significant tech prosperity agreement with the United States, valued at £31 billion. This partnership, announced recently, aims to bolster the UK’s artificial intelligence (AI) sector by attracting investment from major US technology companies. While the deal presents exciting prospects, it raises critical questions regarding its implications for local communities and the domestic tech landscape.

Peter Kyle, who served as the technology secretary until recently, previously cautioned that firms like Meta, Google, and Microsoft wield immense power. He emphasized the need for the UK to engage with these companies not only as business entities but also with a diplomatic approach. The new agreement embodies this perspective, focusing primarily on facilitating US investment in the UK tech sector rather than addressing pressing issues such as AI safety, copyright protections, or a potential digital services tax.

The rationale behind this collaboration is straightforward. US firms dominate the global AI value chain, making them essential partners for the UK government, especially as it seeks to enhance its AI capabilities. The announcement of a combined £31 billion to support UK AI infrastructure, including data centres, is expected to generate positive headlines. However, public skepticism persists regarding the motivations of these tech giants and the potential consequences for local economies.

Concerns center around what communities, especially those in regions like Blyth in Northumberland, will gain in exchange for providing land and grid capacity for these projects. Historical precedents from the US reveal that similar datacentre developments have often led to increased energy costs and disrupted local resources, while creating only a limited number of jobs. This backdrop of local opposition has already surfaced in response to plans for a new “hyperscale” datacentre in Buckinghamshire.

To prevent similar controversies surrounding the newly designated “AI growth zones,” the UK government must assure that the resources allocated for private investment yield tangible benefits for local economies and contribute to public finances. Questions also arise around the priority given to US tech firms over homegrown alternatives. While Liz Kendall, Kyle’s successor as technology secretary, heralds the partnership as a vote of confidence in the UK’s burgeoning AI sector, most participating companies are neither based nor owned in the UK.

Investment from US firms does not have to be mutually exclusive with supporting domestic tech development. However, without careful management, this partnership risks overshadowing the potential growth of the UK’s own tech ecosystem. Currently, UK firms may find themselves competing for scraps if they become overly reliant on US technologies in the most lucrative segments of the AI market.

The UK’s smaller tech firms face challenges in scaling up to compete with their larger US counterparts, which possess greater resources and capabilities. Yet, other nations, such as those in the European Union with initiatives like the EuroStack, and Brazil under President Luiz Inácio Lula da Silva, are charting their paths to enhance domestic tech capabilities.

Fundamentally, the critical question remains: what is the UK government’s long-term vision for AI beyond merely scaling up efforts? There is a tendency to assume that AI will drive significant social and economic transformation. Yet, claims of rapid advancements, such as millions receiving life-saving treatments faster, often lack substantive evidence.

Instead, policymakers should focus on what AI can concretely achieve for society and develop a technological investment strategy that aligns with those goals. This approach would likely yield solutions that are less beneficial to the profit margins of the largest tech firms. For example, there may be substantial public value in leveraging less expensive previous-generation AI models, which could be more accessible for local entities.

The success of China’s DeepSeek illustrates a potential path for the UK to adopt a “fast follower” model, where it monitors innovations and pursues cost-effective means of development rather than relying solely on US tech. Achieving this would require strategic use of public resources to diversify AI research and build independent capabilities.

The new secretary of state has an opportunity to cultivate this agenda, as many seeds for innovation already exist. The government’s sovereign AI unit could support alternative research models, while public resources like the AI Research Resource and the National Data Library could implement access policies favoring smaller organizations and nonprofits.

To ensure that public subsidies do not merely enrich large tech firms, measures must be implemented to curb talent drain, prevent predatory corporate partnerships, and encourage robust regulatory actions when necessary.

Collaboration with the US and its tech companies is essential, yet cautionary tales abound globally where good intentions have resulted in substantial profits for big tech at the expense of local interests. To avoid similar pitfalls, the UK government must approach this partnership with a clear vision, strategic planning, and, importantly, the skill to prioritize the national interest over corporate profit.

Matt Davies serves as the economic and social policy lead at the Ada Lovelace Institute, with contributions from Imogen Parker of the same institute.