Today the government announced that it would withdraw the £1.3 billion previously pledged to AI and tech development. This decision was immediately criticised as setting back the UK’s AI industry.
Last year, the Conservatives announced £800 million in funding for a supercomputer being developed by Edinburgh University and £500 million for the AI Research Resource which provides funding for new Artificial Intelligence startups.
The new Government today announced that it will shelve this investment, calling the promise made by the government an “unfunded commitment”. The claim that the Conservatives had not backed the promise with funding was confirmed by the opposition bench.
With today’s announcement, Labour have undermined their commitment to “work with universities” and “work with industry”. It was criticised by the trade association techUK, who warned that it would damage the UK’s competitive edge and cause a brain drain to competitors.
The State of AI in the UK
Under Boris Johnson, the government pledged to make the UK a “Science and Technology Superpower by 2030. Although neither his successors will likely oversee this target, it undeniable that the Conservatives oversaw significant strides in Artificial Intelligence. Although the UK’s AI summit last year saw a range of critics when it was first announced, it has since been seen in retrospect as having been effective in recentering the UK in global discourse on AI regulation.
The UK has also become an increasingly significant player in AI development itself in recent years. The UK’s AI boom comes at a time when its immediate competitors are stalling. Although praised by many as creating one of the world’s the most comprehensive AI regulatory regimes, the EU’s Artificial Regulation Act which came into effect yesterday is unlikely to help the EU’s stalling AI sector.
In contrast, Early this year, the IMF predicted that the UK economy will benefit the most from AI among advanced economies. According to Government statistics, the UK is home to twice as many AI companies as any other European country. 2023’s AI Index report by Stanford University placed the UK as one of the four leading countries in AI development, alongside China, the USA and all 27 states.
The New Government
With the rapid growth of the industry, Labour appeared to agree on the importance of Artificial Intelligence. In their manifesto, Labour stated that its new ‘industrial policy’ will assist AI development with Government assistance in the form of industrial co-ordination and Government investment.
To be clear, whilst the previous Government promised to pursue these investments, no Labour official has ever made such a commitment. Additionally, Labour has identified alternative routes to state investment. According to their manifesto, instead of state investment, Labour will reform planning rules on the building of data centres. As explained in a previous article, this mirror’s Labour’s housing policy.
However, as opposed to the Edinburgh super-computer, digital infrastructure like data centres have little relevance to the development of Artificial Intelligence.
Final Thought
The UK’s finances have seen better days. In fact as far as ONS statistics are concerned, the last time it saw worse days was when Messerschmitts were still flying overhead.
Debt per GDP figures obscure the scale of the fiscal deficit, which the Chancellor alleges her predecessor “knowingly and deliberately” lied about. As the Chancellor has told the public, Labour have the unenviable task of boosting stagnant growth at a time when “there’s not a huge amount of money”.
However, even given the financial squeeze, is scaling back AI investment really the best route to achieving growth? So far Labour’s agenda has focused on policies that will boost growth by direct job creation. As explained in our previous coverage of Labour’s economic policy, the government have pledged a number of ambitious construction projects that will be funded in large part by the private sector. However, this alone may not be enough.
Economists are generally in agreement that long-run economic growth requires improvement in productivity. UK hourly productivity remains the second lowest in western Europe; roughly 20% behind France. Following the Government’s announcement today, analysis by the Centre for Data Innovation argued that the UK was missing a great opportunity to improve growth by helping alleviate the UK’s productivity crisis.
According to the IMF, the gains in the UK economy will primarily be in the form of increased worker productivity, with the organisation projecting an additional 0.6% annual increase in hourly productivity in the long run from AI development. This becomes more significant when considering that productivity growth from 2023 was 0.1%.
In missing out on these investments, Labour is not only missing out on a growing industry, but on a technology that has the potential to create unprecedented growth across virtually every sector. If Labour truly does want to revitalise British growth for more than the next five years, then today’s decision may have been a mistake.