Ministers released a plan last week that will be able to help smaller tech ventures specialising in AI. It will bring modern data centres, simpler construction rules, and more transparency in public records. Analysts believe this might assist startups in building advanced digital products.
Public comments suggest bodies like the NHS may adopt digital assistants to handle administrative tasks. Industry watchers see an easier path for smaller businesses seeking to refine their products. Some experts speak of a route toward greater reach for local developers.
What Could The Outcome Be For Startups?
Many view the government’s plan as a moment for rising AI businesses to test ideas. State-backed contracts could supply valuable income for health or education tools. People tracking tech investment note that success hinges on open competitions for grants. Strict guidelines may prevent giants from dominating every funding channel. Some watchers await details once official documents appear later this year.
Plenty believe that quicker building approvals, new power sources, and data libraries can support new concepts. Startups could form partnerships with large organisations and gain new audiences.
The real measure depends on collaboration between authorities, funding groups, and local creators. Joint action might help smaller AI teams flourish and introduce novel services nationwide.
What Will The Plan Do To UK Startups?
This is what experts think the impact of this AI strategy will have on startups in the UK…
Our Experts:
David Bloom, Chairman, Kao Data
Muj Choudhury, CEO and Co-Founder, RocketPhone
Tom Sheridan, VP of Investment, RTP Global
Vanessa Barnett, Technology, Data, and AI Partner, Keystone Law
James Klein, Corporate Partner, Spencer West LLP
Sergio Fregoni, Executive Director, IDEO
Ali Kazmi, Co-Founder, AI Simulator
Milo Constable, Principal, Slalom
Ben Maling, UK and European Patent Attorney, EIP
Dr. Peter Garraghan, CEO and Co-Founder, Mindgard
Phill Robinson, CEO and Co-Founder, Boardwave
Ulf Persson, CEO, ABBYY
Oliver Johnston-Watt, Investment Analyst, Par Equity
David Bloom, Chairman, Kao Data
“Securing domestic computing capacity is essential to ensure the UK meets its ambitions to become an ‘AI maker rather than an AI taker’, and to attract continued investment from the world’s leading startups and scaleups to our shores.
“Kao Data is encouraged by the report’s proposal to establish AI Growth Zones (AIGZs) to accelerate the development of AI data centres—an initiative we have long championed via our £350m data centre investment in Greater Manchester, and our Harlow campus.
“Data centres are undoubtedly essential to harness the full potential of AI, and we also welcome the government’s continued recognition of their critical role.
“As part of the proposed AIGZs, it’s now fundamental we use sustainable infrastructure to catalyse the green transition and develop both sovereign AI compute and renewable energy together, at-scale”.”
Muj Choudhury, CEO and Co-Founder, RocketPhone
“This bold new blueprint for AI could be exactly what Britain’s startup sector needs right now. The plan shows real ambition and it’s refreshing to see infrastructure being prioritised rather than buzzwords and empty promises.
“Yet critical gaps remain in how these resources will be democratically distributed across the ecosystem. While infrastructure prioritisation is welcome, the focus on supercomputers primarily benefits research institutions rather than commercial innovation.
“A concerning disconnect exists between the creation of primary IP in universities and its practical commercialisation in the market. The £14bn private sector investment, while substantial, appears concentrated among established players, potentially reinforcing existing market dominance rather than fostering new innovation.
“The emphasis on public sector efficiency, while important, overshadows the more crucial need to cultivate the next DeepMind or breakthrough AI company. There’s a real risk that government contracts and resources will circulate among a small group of incumbent firms, limiting the proliferation of AI innovation across the broader market.
“For British businesses, particularly startups, success hinges on more than just infrastructure investment. The projected £47bn economic uplift requires addressing fundamental challenges around data access, skills gaps and computational costs. More importantly, we need mechanisms to ensure smaller, innovative companies can access these new resources and compete effectively.
“Without specific measures to prevent market concentration and support emerging players, we risk creating a two-tier AI economy where benefits flow primarily to established firms. The plan needs stronger provisions for distributing opportunities beyond the usual suspects and supporting the commercialisation of university research.”
Tom Sheridan, VP of Investment, RTP Global
“The UK initiatives announced to support the AI sector are welcome, but we need to be clear-eyed about their impact.
“On the one hand, access for academia and public services to dramatically more compute power will accelerate the speed of AI innovation in our domestic health, energy and transport sectors. What this does to place AI at the heart of efforts to grow the UK economy, on the other hand, is questionable. Tech start-ups, even those developing ‘sensitive’ AI applications, seemingly won’t have access to this expansion in sovereign compute. This means they’re going to continue looking elsewhere for compute and U.S. cloud companies will be happy to serve them.
“We also need to put this into context. 100,000 GPUs of government-owned compute by 2030 is equivalent to the compute used to train Meta’s Llama foundational AI model today. We are extremely far behind. UK energy prices also continue to be exceptionally high compared to peer nations. To help UK businesses working and innovating with AI, the government needs to also address this.”
Vanessa Barnett, Technology, Data, and AI Partner, Keystone Law
“The UK government has bold ambitions – AI growth zones and wanting the UK to be a natural place for AI business. This is welcome news, but it will be hard work. As a society – in our home lives and our workplaces – we will need to come to a balance point of where AI can be useful/have value. The government says that it is ‘unapologetic in their ambition’ but beware of promising too much too fast.
“We are lucky in the UK to have regulators who are not afraid of technology and are realistic about balancing innovation and regulation. In my view, the UK sits emotionally half-way between the EU and the US when it comes to regulation of technology (and what technology is used for).
“We should expect reforms in data laws, intellectual property laws and better funded regulators. The most critical foundation to success in all of this though, will be AI literacy across the board. Makers, teachers, and users will all need to better understand what is going on and why what they are doing with AI is useful.”
James Klein, Corporate Partner, Spencer West LLP
“It is of real importance that AI be at the forefront of future growth for businesses and the economy in the UK. The UK needs to rejuvenate, and positively transform, its public services and infrastructure. It is imperative that we generate tangible future long-term growth for early-stage companies, as well as scale ups, at a time when there are many in the UK weighing up their options and looking to potentially take their businesses overseas as they reflect upon the UK as a whole, including the effect of upcoming tax increases brought about by the Budget.
“We must retain both our talent and our successful businesses which are often created out of our leading universities allowing them to meaningfully scale and grow to the size of those companies we see in other parts on the World.
“The AI Plan seems to be very sensible and includes (amongst other things) a focus on AI sovereignty which will pinpoint where the UK can compete and win in the world of AI; removing barriers to scaling necessary and relevant AI pilots in government, (at the same time validating the notion that AI automation is required in the public sector); and offering a route to regulatory reform and change to procurement to boost UK AI startups as well as AI growth zones with faster planning permission and grid connections.
“All in all, the UK’s AI Action Plan seems a very positive step in the right direction. However, as with everything, its implementation and appeal to all parts of the society will ultimately be the key to its success or the reason for its failure.”
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Sergio Fregoni, Executive Director, IDEO
“The UK can learn from the Finnish government, who last year worked with a number of private agencies and software providers to facilitate entrepreneurial growth via a virtual agent network. This can reduce wait times, improve service quality, and increase accessibility for all customers, including those with disabilities or limited digital literacy.”
Ali Kazmi, Co-Founder, AI Simulator
“The AI Action Plan addresses the needs of startups in several ways. The key ones to me are the investment into AI infrastructure, the focus on making the public sector more accessible and the encouragement of public-private partnerships.
“The large investment into AI infrastructure, including building a new supercomputer and creating an AI growth zone, will give startups the powerful computing resources and tech support they need to develop their products. This is especially helpful for AI-driven, research-led startups who rely on these tools to bring their ideas to life.
“AI growth zones will be a key player in drawing in international investment, as these hubs of AI activity will improve access to support, such as incubation programmes, and a concentration of expertise, allowing startups to get to market and scale and a faster rate than before.
“The plan puts a strong focus on making public sector data more accessible, including high-value datasets. This will help startups create more advanced and impactful solutions, particularly in fields like healthcare, where data plays a crucial role in driving innovation.
“From this, we will possibly see more rapid innovations entering the NHS, especially from the likes of university spinouts working in the AI space, in which this more accessible data could help secure vital proof-of-concept funding that allows the product to go to market.
“The plan encourages public-private partnerships and promotes collaboration with international AI safety networks, which will make it easier to develop products and find markets. These partnerships allow startups the chance to work together, share resources, and access global expertise – helping them speed up product development and find and reach wider markets.”
Milo Constable, Principal, Slalom
“The Government’s announcement of a £14bn investment in AI infrastructure marks a huge moment for the UK, representing a positive step forward in the country’s journey to becoming a global AI leader.
“While the Government has received a lot of criticism for its previously cautious stance, this points to new intentions from Labour to prioritise innovation, with an effective plan announced for adoption and implementation.
“This shift aligns with Rachel Reeves’ emphasis on increasing productivity and efficiency announced in last year’s budget. While the commitment to positioning Britain as a global AI leader is commendable, the real test will lie in ensuring effective implementation across the public and private sectors. AI needs to be deployed in a human-centric way that focuses on enabling people, protecting data, and foregrounding security. People need to be able to understand how to make the most of AI compliantly, sustainably, and effectively.
“Ultimately, it’s not just about having the right technology, but about empowering people to use it effectively.
“Rather than focusing on workforce reductions, the narrative around AI needs to centre on its potential to create jobs, enhance productivity and reshape the workforce – much like the internet did in the 1990s or the industrial revolution did in the 18th century. The Government will also need to ensure promises and pledges are upheld with strong enablement support for businesses. A public-private partnership to get AI working for the UK is required, bringing together AI and subject matter experts, from businesses such as Slalom, as well as Government agencies.
All in all, this investment has the potential to redefine the UK’s role in the global AI race, but bold leadership will be required to deliver on points including safety, adoption, and growth.”
Ben Maling, UK and European Patent Attorney, EIP
“Recent events have highlighted some of the reasons why the UK must not become a technological vassal state of the US, and this plan is a rallying cry to those who believe in the UK’s potential for leadership.
“UK startups stand to benefit from many of the recommendations, and particularly those with potential to support the public sector. However, such a plan must be implemented without throwing fundamental rights and values to the wolves, and while continually evaluating assumptions about the economic benefits of various kinds of AI. Only in this way will the plan support companies that leverage the technology to provide genuine value.”
Dr. Peter Garraghan, CEO and Co-Founder, Mindgard
“It’s good to see a change in government messaging on the potential in AI, particularly in the rate of innovation being reported within other countries. Providing sizable investment into infrastructure to create new forms of AI-driven apps and services is a good idea, although for context many of the large US internet companies have individually spent similar figures purchasing AI hardware in 2024 alone, demonstrating the technological race at play.
“The effectiveness of the proposed AI applications listed remains to be seen. Some of the examples given for assistant administrative actions and inspection roads could already have been addressed through the use of improved processes and technology (even before considering the use of AI). It is however a step in the right direction to help with increasing productivity. The trick is that with AI — like any tool — is determining where it can be best placed to support work activities.
“Regarding the impact on startups, the focus on foundational investments in compute, data access, and talent is a positive development. The commitment to creating AI Growth Zones and unlocking high-impact public datasets is likely to help startups. As the CEO of a UK-based security for AI startup, it will be interesting to see the exact support measures that are offered to help relocate top AI talent to the UK and how partnerships with the UK national security community are structured.”
Phill Robinson, CEO and Co-Founder, Boardwave
“This once-in-a-generation shift to an AI-driven economy represents the best chance we have today to build our software industry into something truly world leading, to move on from fifteen years of sclerotic growth and boost our national productivity. We know that proper investment in generative AI (just one part of the AI landscape) could add 1.2% to UK productivity, delivering an extra £31 billion in GDP annually, a handy sum for a government in a tight fiscal bind.
“The impact of AI is going to be more profound than the Industrial Revolution, redrawing the boundaries and disrupting industries where we have traditionally been strong. A big part of the government’s plan seems to be making more use of AI tools and freeing up public and private data sets to allow innocation to happen.
“The UK government is critically aware of the opportunity for growth that this brings to our economy and the announcement of a formal AI strategy will help to ensure there is a continued focus on building a strong local skills base, and the development of more, much-needed research across sectors.
“Where UK startups and scaleups will specifically need additional support is through investment and ongoing collaboration withe the technology and software sectors. Keir Starmer’s government needs to make sure that homegrown AI-powered businesses both ‘scale and stay’ in the UK and avoid being bought by deep pocketed founders in the US or other markets. Only then will the UK start to set the pace and have a more realistic chance of building world-beating companies with global impact, just like Google, Amazon, Microsoft, Salesforce and Apple.”
Ulf Persson, CEO, ABBYY
“The UK’s new AI plan has the potential to shape a more AI-ready workforce, as long as the government takes care to balance innovation with harm mitigation.
“To maximise effect and to reduce disruption there needs to be a focus on developing purpose-built AI systems for specific tasks, rather than relying heavily on generalised AI tools, would be welcome. Specific AI applications may allow industries to harness innovation while safeguarding jobs and improving efficiency.
“While the government emphasises the creation of over 13,250 jobs, it’s important not to forget the implications for the workforce as AI takes over routine tasks. The transition will require a significant investment in retraining and upskilling the workforce, a shift that will be challenging but achievable if the investment goes to the right places. It could even lead to more fulfilling roles.
“Transparent frameworks that hold individuals and organisations responsible for AI systems will help ensure these technologies are managed ethically and effectively. At the same time, businesses must retain enough freedom to innovate and remain competitive.
“With the right balance, the UK can continue to drive AI advancements while addressing the societal challenges that accompany such transformative technology.”
Oliver Johnston-Watt, Investment Analyst, Par Equity
“The plan outlines key fundamentals needed to make the UK’s research output globally competitive, however it doesn’t appear to directly address the needs of startups or scaleups. While it may provide some benefits through regulatory streamlining and guidance, in terms of accelerating technology development or offering commercial advantages, it seems rather vague, with few actionable steps for early-stage companies.
“The real challenge for companies lies in the lack of infrastructure, particularly in computing and energy capacity, which the government must address to create a viable environment for growth.
“More detailed information is expected to be released later this year. However, the provision of access to new future commute centres and non-dilutive funding for mission-critical AI infrastructure projects could be helpful.
“The plan is a step in the right direction, particularly with its focus on exascale computing, which could improve the UK’s ability to develop advanced AI products. If the UK is to develop competitive AI products, infrastructure improvements need to be accelerated. Access to energy-efficient, cost-effective resources and robust supercomputing capabilities will be crucial for helping startups develop innovative products and scale them successfully.
“The plan may also make market discovery easier for some startups, particularly with its focus on AI zones and collaboration. If these zones can foster vertical-specific centres of excellence, they could help startups define and refine their products within a supportive community. However, for companies adopting frontier technologies, there will likely need to be subsidies or incentives to ensure the UK can keep pace with the US and China.
“While the proposed expansion of compute capacity by 20x by 2030 is a positive step, it may not be enough, given the rapid advancements in both hardware and software expected in the coming years. A stretch goal would be beneficial, especially to align with the US and China’s anticipated progress.”
