UK Government Launches £100 Million AI Hardware Initiative to Boost Domestic Tech Sector

UK government will buy tech to boost AI sector in £100mn growth push

The UK government will promise to buy emerging chip technology from British companies in a £100mn bid to boost growth by supporting the artificial intelligence sector. Liz Kendall, the science secretary, said the government would offer guaranteed payments to British start-ups producing AI hardware that can help sectors such as life sciences and financial services. Under a "first customer" promise modelled on the way the government bought Covid vaccines, Kendall's department will commit in advance to buying AI inference chips that meet set performance standards. Kendall acknowledged that £100mn "sounds small compared to the billions being spent" in the US and China but argued it was about "government showing leadership in the areas where we think we will be absolutely world-leading". Valued at over £72bn, the UK's AI market is the third largest in the world following the US and China, according to the British government. However, investment in AI in the UK lags behind the US. In 2024, US private investment in AI was at $109.1bn -- significantly higher than the UK's $4.5bn, according to the Stanford AI Index. The science secretary did not provide precise details on how the "advance payment mechanism" would work but said "cutting-edge chip companies" based in Britain will be told "the government will buy that when the technology reaches a certain standard". "Our particular strengths as a country lie in areas like life sciences, financial services, the defence sector and the creative sector. And where we will really lead the world is where we can use the power of AI in those sectors," Kendall told the Financial Times. The plans came as part of a wider AI package designed to upgrade Britain's tech infrastructure and convince entrepreneurs and investors that Labour is backing the sector ahead of next week's Budget that is expected to raise taxes on the wealthy. The UK has sought to attract investment from US AI companies such as OpenAI and Anthropic. The government has signed several "strategic partnerships" with American groups in a bid to attract foreign investment in UK AI infrastructure and talent, in exchange for adopting their technology in the public sector. Sue Daley of lobby group TechUK said the plan showed "real ambition" but warned: "Advanced market commitments of this kind must be designed carefully to avoid unintentionally distorting competition." The government also announced that James Wise, a venture capitalist at Balderton, would chair the government's £500mn sovereign AI unit, which has been set up to back AI start-ups alongside the British Business Bank.

UK Government announces billions in AI investment ahead of Budget

This content has been selected, created and edited by the Finextra editorial team based upon its relevance and interest to our community. AI has been prioritised as a driver of growth across the UK as international companies such as Graphcore, AI Pathfinder, Perplexity AI, and Cursor are investing in UK AI infrastructure. £24.25 billion in private investment has been poured into the country in the last month. This announcement comes one week before Chancellor Rachel Reeves delivers the Autumn Budget on 26 November. An AI Growth Zone will be established in South Wales, with companies such as Microsoft and Vantage Data Centers contributing to the £10 billion investment set to unlock 5,000 jobs. Vantage Data Centers will be working with universities in South Wales to nurture AI talent. Chancellor Rachel Reeves said: "Today's confirmation of our fourth AI Growth Zone is our Plan for Change in action - creating thousands of jobs and unlocking new investment for local communities in the industries of the future, cementing our position as Europe's leading tech sector." The Government is allocating £5 million for each of the four AI Growth Zones that were announced in January as part of the AI Opportunities Action Plan. AI growth will be fueled through the Sovereign AI Unit backed by £500 million in investments to fund scale-ups throughout the country, to be chaired by venture capitalist James Wise. The Government pledged its support to invest in UK startups building AI hardware. The announcement follows NVIDIA's £2 billion investment in the UK AI innovation in September. Secretary of State for Science, Innovation, and Technology, Liz Kendall said: "The backing by international investors today is a vote of confidence in the UK - and we're determined to do even more to ensure we are backing British businesses, workers and researchers to benefit from the opportunities AI brings. This is about bringing jobs, opportunities and hope to the people and places that need it most, delivering on our promise of change." £137 million in government funding has also been allocated for "AI supercharges" in science and technology to drive research in drugs and treatments.