A Big, Beautiful US Investment Boost for the UK Tech Sector?

The UK tech sector received a gift last week – a big, beautiful, American gift in the form of investments into UK AI infrastructure worth over £30 billion pounds.

The suite of agreements– dubbed the Tech Prosperity Deal – includes an £22 billion investment from Microsoft to build the UK’s cloud and AI infrastructure in collaboration with Nscale and Nvidia, £11 billion from Nvidia for UK “AI factories” and quantum technologies, and a £5 billion investment from Google for a new data centre in Hertfordshire. The prosperity deal will reportedly create thousands of British jobs.

A Win for Labour’s Tech Ambitions

The announcements mark a triumph for Labour’s efforts to position itself as a tech and investment-friendly party and the UK as a top AI ‘maker’ after the US and China. Starmer’s government has moved on from the Conservatives’ language of making the UK a ‘global AI superpower,’ but they still see AI technologies as the potential key to tackling some of the UK’s persistent issues, such as kickstarting economic growth.

Earlier this year, the government unveiled their ambitious AI action plan that set out the UK’s priorities for enhancing its AI ecosystem, including through measures to support UK data centres, compute capabilities and the energy sector. While the plan was positively received, it left unanswered the question of how to finance the UK’s tech ambitions.

It is now clear who is footing the bill: US Big Tech, primarily Microsoft and Nvidia. Starmer’s charm offensive with President Trump seems to have paid off.

The UK government has emphasised how these investments will transform British lives and improve the lives of working people nationwide, with a particular emphasis on the Northeast. British-based firms are involved too, most notably NScale. Labour is keen to ensure that the US-UK Tech partnership provides not only a much-needed financial, but also a credibility boost to their AI Action Plan, at a time when Starmer’s approval rate is at an all-time low.

What exactly US companies have received in return for their commitments is less clear – much of the difficult debates around taxes, AI safety and data protection were pushed aside by pomp and circumstance: the tech edition.

US Cash to Pay for UK ‘Sovereign’ Tech?

When the AI Action Plan was launched in January, the world had their eyes on Washington, DC. As Trump assumed office for a second time, concerns around the political influence of his Silicon Valley allies dominated the headlines, sparking renewed European debates about the dangers of over-reliance on US tech. European partners in the Netherlands and France boosted efforts to reduce dependence on US infrastructure providers and build European sovereign technology instead. Eight months later, American big tech is back in favour and here to build the UK’s ‘sovereign’ capabilities.

The UK is between a rock and hard place: to deliver its tech ambitions and to remain relevant in the AI race it is dependent on foreign, primarily US, capital. Let us be clear: Chinese investments to scale-up AI infrastructure is not the alternative solution. But how sovereign is this infrastructure if it is funded, designed, built, and operated by American companies? What are the terms and conditions of these investments? Do alternative sources to US Big Tech investments exist?

These companies’ CEOs’ close – yet potentially volatile – relationships with the MAGA movement expose UK infrastructure to political uncertainty. Although President Trump’s second state visit did stress just how special the special relationship between the US and the UK is, alignment between UK national objectives and American CEOs cannot be assumed. This was highlighted when Elon Musk boasted about his ability to ‘collapse’ the Ukrainian line of defence should he choose to disconnect the Ukrainian army from Starlink (something he has admitted to doing briefly in 2022).

Furthermore, how might American investment impact ongoing debates about regulation, taxation, and online harms? These same companies that are investing in the UK’s AI ecosystem have avoided UK tax duties and lobbied against both the UK’s Online Safety and Digital Services acts, with Trump even suggesting tariffs on countries that try to tax American-provided digital services. This week, however, the government has gladly ignored the question of whether the Digital Services Act – forecast to bring in £4.4-5.2 billion in tax revenue over the course of this government – or policy independence more broadly, are jeopardised by this significant inflow of American cash.

Dependence on US Tech is also a National Security Question

Dependence on US capital is a recurring issue for the UK tech sector. Although the UK has significant strengths and assets – including a strong track record in early research and the academic sector, a thriving start-up ecosystem, and thought leadership in AI safety and security work – gaps remain.

The UK’s inability to generate sufficient scale-up capital to make big bets on its own start-ups makes the tech sector open but also vulnerable to US investors and companies scooping up homegrown entrepreneurs. The sale of DeepMind to Google (for £400 million in 2014) remains one of the most painful but by far not the only example. Just this summer Oxford Ionics was acquired by its US competitor, IonQ. Despite the boom in UK defence triggered in part by public spending – government investment in defence grew 6% in real terms in 2024-25 – the UK continues to rely on US capital to scale up. Nvidia’s plan to boost UK AI start-ups with an additional $2 billion in investments is a much-needed cash injection, but again raises questions about US dependence and control. Many of these start-ups may well follow the post-pandemic trend of relocating to the US to attract further investment, reinforcing doubts about whether the British or American economy will ultimately benefit more from the ever-deeper penetration of American capital in British businesses.

Having the ability to scale up UK tech companies is not just a question of ensuring economic growth though. Sovereign capabilities are also crucial for national security considerations. Not all technologies covered under the UK-US Tech partnership have a national security application. A large focus of the partnership is also on nuclear energy and biotech research, including AI-facilitated drug development. But reliance on the US for the underlying infrastructure, including in the UK energy sector, should raise questions about national resilience. Both the Covid-19 pandemic and the vendor diversification discussions in the 5G telecommunication context have previously illustrated the risks of over-reliance on individual vendors.

Calls to reduce European and British dependence on the US – more common earlier in the year – have quickly been pushed to the background in light of the big, beautiful investment package accompanying Trump’s second state visit.

Securing Investment – But On What Conditions?

The US investments allow the UK to significantly enhance its AI infrastructure and promise new compute and training capabilities. With these the UK can remain relevant in the race to develop AI capabilities without relying on equivalent Chinese investments, whilst positioning itself as an attractive market for AI companies and investors. That is a success.

However, the fact that Labour’s answer to realising UK tech ambitions is by using American cash puts the UK in a difficult position. The government needs to address inconvenient yet critical questions about the terms and conditions of these investments: who benefits most and what are the potential trade-offs regarding AI safety, taxes and national resilience? While pursuing European tech sovereignty is still a priority on the continent, this wider discussion was too absent in the UK during a week of gilded engagements and eye-watering investments.

Especially with respect to technologies that are relevant for national security, the UK needs a broader discussion about the implications of overreliance on single sources of capital or single vendors – even if they are American. This also raises questions about what the alternatives to US investment are and what other sources of trusted capital exist for the UK to scale technology for national security.

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