The recent decision by the new Labour government to halt £1.3 billion of “unfunded” investment in UK tech and AI projects has sparked significant controversy within the tech community. This move has raised concerns about the UK’s ability to maintain its competitive edge in the global tech arena. We explore the details of this decision, the reactions from various stakeholders, and its potential implications for the tech sector.
The Government’s Stance
The Department for Science, Innovation and Technology (DSIT) clarified that the previous Conservative administration had not allocated the promised funding in their budget. Consequently, the Labour government decided to discontinue these investments to restore economic stability. A DSIT spokesperson explained, “The government is taking difficult and necessary spending decisions across all departments in the face of billions of pounds of unfunded commitments. This is essential to restore economic stability and deliver our national mission for growth” (Independent).
Among the affected projects are the £800 million exascale supercomputer at the University of Edinburgh and £500 million in additional funding for the AI Research Resource, which supports computing power for AI. However, the government has committed to continuing with £300 million of already allocated funds for the AI Research Resource.
Reactions from the Tech Community
The funding cut has elicited strong reactions from the startup community and venture capitalists (VCs). Nathan Benaich, partner at AI-focused VC Air Street Capital, likened the cut to “cutting back on railroads in the nineteenth century,” highlighting the critical importance of computing infrastructure today (Sifted).
Joshua Wöhle, founder of AI edtech Mindstone, expressed concerns about the long-term implications of the cut. “While £1.3bn is ‘nothing’ in the AI race, the move tells people the UK government is ‘not serious’ about the technology. It puts into question the government’s ability to think about the future — innovation like this always being a cost today for impact later.” (Sifted)
Sue Daley, the director of technology and innovation at techUK, stressed the importance of investing in large-scale computers for scientific breakthroughs. “The UK had sent clear signals about its ambitions to host a new generation of computers to enable cutting edge research, including in AI. In an extremely competitive global environment, the government needs to come forward with new proposals quickly. Otherwise, we will lose out against our peers,” she said (BBC).
Concerns About Competitiveness
The decision to cut funding has raised concerns about the UK’s competitiveness in the global tech arena. Some fear that it may push startups to relocate to countries with more favourable conditions. “The biggest effect that these cuts could have on startups is encouraging them to look to shift their operations to the US,” said Wöhle (Sifted).
Barney Hussey-Yeo, founder of a tech business, expressed similar concerns, warning that reducing investment could risk “pushing more entrepreneurs to the US”. Businessman Chris van der Kuyl described the move as “idiotic,” emphasising the potential negative impact on the UK’s tech sector (BBC).
A Differing View
Not everyone in the tech community views the cuts as entirely negative. Simon Murdoch, managing partner at Episode 1, suggested that the immediate impact on startups might be minimal. “Large scale infrastructure is expensive and can become obsolete quickly, so investment in software infrastructure, and in multiple early-stage and growth companies may be a better use of taxpayers’ money,” he explained (Sifted).
The Road Ahead
Despite the setback, the UK government continues to show support for the tech sector through other initiatives. Last week, the government announced plans to invest £8.3bn into GB Energy, a state-owned company to boost renewable energy generation. This move, aimed at mobilizing £60bn in private capital, could have positive knock-on effects for smaller startups (Sifted).
Additionally, the government is developing the AI Opportunities Action Plan, led by industry expert Matt Clifford. This plan aims to bolster compute infrastructure and identify how AI and emerging technologies can best support the UK’s industrial strategy (BBC).
So we shall wait with and see if they are true to their word and hope in the meantime that startups that were banking on this funding, are able to survive.
The £1.3bn funding cut by the UK government presents significant challenges for the tech and AI sectors. However, it also calls for resilience and adaptability within the community. While the immediate effects are concerning, particularly regarding global competitiveness and investor confidence, the ongoing commitment to other tech initiatives offers a glimmer of hope.
