Implications of the Industrial Strategy for the UK tech sector

The UK’s Modern Industrial Strategy sets out a bold 10-year vision to supercharge the tech sector.

On 23 June, the UK Government unveiled its Modern Industrial Strategy, a 160 page plan spanning the next 10 years and aiming to encourage investment. As one of the eight sectors targeted, ‘Digital and Technologies’ received top billing, with the first paragraph highlighting that “technological advances in life sciences, clean energy and artificial intelligence are… reshaping our economy”, and that the UK is “well positioned to take advantage”. 

The accompanying Digital and Technologies Sector Plan aims to position the UK as one of the top three places in the world to “create, invest in and scale-up a fast growing technology business”. This echoes comments from Nvidia CEO Jensen Huang, who at London Tech Week praised the UK as having the world’s third largest AI venture capital ecosystem. Huang also, however, noted the UK lacks the infrastructure to fully support this.

The Strategy aims to address any infrastructure deficiencies by refreshing the Nationally Significant Infrastructure Projects regime to fast-track planning decisions for major technology projects, and through significant investments, including £1.8 billion to rollout gigabit-capable broadband and maximise 5G technologies. The Government will also support Ofgem to expedite electricity grid connections for key projects such as the datacentres and semiconductor plants needed to underpin AI investment.

Building on recommendations in the AI Opportunities Action Plan, the Government earmarks £1 billion to expand UK AI compute capacity by a factor of at least 20, with a long-term compute strategy to follow in late 2025. £500m is allocated for a new sovereign AI unit, £750 million to a new supercomputer in Edinburgh, and £600m to fast-track “AI Growth Zones”, which will see relaxed planning requirements for compute infrastructure, including data centres.

A digital skills drive, in partnership with Microsoft, Google and Nvidia, will upskill 7.5 million workers in AI by 2030. This will surely be welcomed given recent research from AWS indicated that “one in three UK businesses say they lack the digital skills needed to adopt AI”.

Investment in semiconductors, which will further bolster AI development as well as other advanced technologies, includes £19 million to establish a new UK Semiconductor Centre to advance R&D. Cyber security will receive an initial £10 million nationally and £2 million for a Cyber AI Hub in Belfast, with £1 billion of further investment expected for the new National Cyber Innovation Centre in Cheltenham.

Building on the UK’s existing quantum technologies footprint, ranking second worldwide in 2023, the Strategy cites a 10 year funding commitment for the National Quantum Technologies Programme, including £670 million to drive development and adoption of quantum computers.

The Strategy has been met with cautious enthusiasm from technology business leaders. Cisco’s UK CEO, Sarah Walker, emphasised the importance of technology development for the Modern Industry Strategy as a whole, as it will underpin the other eight priority sectors, including Financial Services, Defence, and Clean Energy. There may, however, be scepticism until the Government makes concrete moves to deploy the bold vision outlined in the Strategy. Industry leaders will be looking for commitments to back British innovation and British firms. As Mark Boost, chief executive of Civo, stresses, “if British firms can’t win contracts in their own country, we’re just subsidising foreign dominance”.

Many in the industry will also be watching for regulatory developments to support these new investments in “frontier technologies”. Concerns remain around the ongoing lack of dedicated AI regulation in the UK, not helped by the delay to the Government’s proposed AI Bill (now unlikely to be introduced until the next parliamentary session). Although the Digital Technologies Sector Plan states the Government will work with industry on the standards, norms and values essential to safe and effective adoption of new technologies, without further detail this still feels somewhat like a footnote.

The Strategy’s ambition is commendable, but it remains to be seen whether the Government can deliver on its promises and maintain the UK’s position as one of the top three players in the Digital and Technologies sector. While we await further developments, you can expect more analysis from Shoosmiths on implications for our clients, as well as on any updates as and when they come.