(Bloomberg) — At his party’s inaugural investment summit last week, UK Prime Minister Keir Starmer positioned himself as a champion for artificial intelligence. Appearing alongside former Google Chief Executive Officer Eric Schmidt, Starmer called AI an “opportunity,” rather than something to be scared of, and said his country “needs to run towards” it.
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The public remarks, among his first on the subject since taking office in July, were intended to reassure business leaders ahead of the British premier’s opening moves on AI. In the coming months, Starmer’s Labour government is expected to release a plan for harnessing the technology in the public sector, as well as a bill to regulate the most advanced models. For Starmer, those policies are part of a broader effort to instill confidence in his economic agenda after a rocky start to his tenure – and to capitalize on the tech industry’s frustration with tougher regulations in the EU.
“We now have a competitive edge over the EU,” Peter Kyle, the UK’s science and technology secretary, said in an interview with Bloomberg News. “That is something I’m absolutely determined to take advantage of.”
Numerous world leaders, including Starmer’s predecessor in the UK, Rishi Sunak, have vied to turn their countries into AI hubs while balancing the need for some guardrails on the technology. A spokesperson for Kyle’s department said Labour has secured £24 billion worth of investment into “digital and AI infrastructure” since entering office in July, making the “UK a magnet for investment.”
But Starmer’s AI embrace has been complicated by budget cutbacks and some confused early messaging, according to lawmakers and industry watchers.
Kyle shocked many in the UK’s tech sector this summer by nixing £1.3 billion in funding planned for national computing projects, including £800 million to develop a supercomputer at Edinburgh University. Kyle said Sunak’s Conservative government made its spending pledge for the project without allocating the necessary funds. “I’ve inherited a terrible legacy,” Kyle said.
Kyle’s department is now assessing the nation’s broader computing needs, he said, promising that any projects Labour proposes will be “fully-funded and it will be delivered on time.” But his department is also facing the possibility of cuts in the UK budget set to be presented next week.
In the tech industry, there’s a prevailing sense that Starmer’s party isn’t so much running toward AI as walking slowly. “We’re still lacking clarity about the direction of travel,” said James Wise, a partner with the venture firm Balderton Capital.
The confusion dates back to the first days of the administration. When Labour initially laid out its governing agenda during the King’s speech in July, the remarks were expected to include details about an AI bill drafted by Kyle. However, Labour pulled the measure at the last minute to replace it with a cybersecurity bill after Kyle was left “deeply concerned” about vulnerabilities in the UK’s networks bequeathed the previous government.That swap left a false impression that Labour had “gone cold” on addressing AI, Kyle added. He said he wishes he had communicated “more sharply” on this topic at the time.Perhaps magnifying the sense that the UK was slipping back under the new government was the contrast with Sunak, who took an interest in the technology, organizing the first global summit on AI safety, and even holding an on-stage conversation with Elon Musk about the topic.With his upcoming AI legislation, Kyle said he plans to take voluntary pledges that AI developers, including Google and OpenAI, made under the prior government about disclosing certain capabilities and risks, and turn them into law. He will also create a new government body to monitor and enforce those codes.
A spokesperson for Kyle’s department said Labour is also changing laws to make it easier to build data centers, a key piece of physical infrastructure needed to support the development of AI. Balderton’s Wise joined other investors in praising an announcement from Starmer’s summit last week of £6.3 billion worth of new computing facilities in the country.
This week, Kyle’s department also detailed a new bill designed to use Britain’s public databases to cut red tape in areas such as policing and health care — a sign of how the UK is focusing tech policies on public services. The government said the measure will provide a £10 billion boost to the UK economy.
But some of Labour’s own lawmakers believe the government lacks a coherent strategy. One member of parliament, who requested anonymity in order to speak candidly, told Bloomberg they were supportive of the focus on using AI for the public sector, but worried that national services are still grappling with foundational issues in their digital networks to make this a reality anytime soon. They also said more needs to be done to bolster the private sector.
“Public service reform is critical, but then you need the superstar companies,” said Benedict Macon-Cooney, chief policy strategist at the Tony Blair Institute. Blair, the former Labour prime minister, is leading calls for the government to roll out AI in the public sector and has said doing so could save the UK £200 billion over five years.
The UK leads Europe in startup financing and is home to Google DeepMind and world-class research centers, but many tech investors worry lackluster government support and higher taxes put the nation at risk of losing its strong position. Limited acquisition opportunities and a sluggish London stock market also often push UK startups to look to cross the Atlantic.UK-based venture capital firms have invested $3.7 billion into AI firms so far this year, less than a tenth of the US totals and down from $5.8 billion in 2021, according to research firm PitchBook. French funds have invested less in AI but the figure has grown over the past three years.
Labour is planning to cut tax relief for entrepreneurs selling their business, and could also extend capital gains tax on investment in other areas, adding to concern among venture capitalists. Still, much of the industry has a wait-and-see attitude on the government’s AI efforts, given Labour’s public embrace of AI.
“Labour is saying the right things,” said Marc Warner, chief executive for Faculty, an AI company that contracts with the government. “But it is time for some action.”
–With assistance from Yazhou Sun and Isabella Ward.
