Government announces £100m 'first customer' scheme to power domestic AI hardware boom

Goal to lock in UK position as Europe’s leading tech hub

Ministers hope the plan will reassure entrepreneurs and global investors that Britain remains an attractive destination for AI research, infrastructure and talent.

The UK government has unveiled a £100 million plan to accelerate the country's AI sector by directly purchasing cutting-edge chip technology from British start-ups. Ministers say this approach will stimulate innovation, attract investment and cement the UK's position as Europe's leading tech hub.

Science Secretary Liz Kendall announced the initiative, which introduces a "first customer" model inspired by the advance purchase agreements used to secure Covid-19 vaccines.

Under the scheme, the government will guarantee payments to UK companies developing AI inference chips once their hardware reaches agreed performance benchmarks. Kendall acknowledged that the investment is modest compared with multibillion-dollar programmes in the US and China, but insisted its purpose is strategic.

"It's about government showing leadership in the areas where we think we will be absolutely world-leading," she said, pointing to the UK's strengths in life sciences, financial services, defence and the creative sectors.

The UK's AI market is valued at more than £72 billion, making it the third largest globally. Yet private investment lags far behind that of the US, where funding reached $109.1 billion in 2024, compared with Britain's $4.5 billion, according to the Stanford AI Index.

The announcement forms part of a wider government package ahead of the Budget, intended to signal Labour's commitment to long-term tech growth.

Ministers hope the plan will reassure entrepreneurs and global investors that Britain remains an attractive destination for AI research, infrastructure and talent.

Over recent months, the UK has sought to court US AI powerhouses such as OpenAI and Anthropic, signing multiple "strategic partnerships" that offer the companies a role in public-sector modernisation in exchange for investment on British soil.

TechUK's Sue Daley said the government's guaranteed-purchase approach showed "real ambition" but cautioned that such commitments "must be designed carefully to avoid unintentionally distorting competition."

In a further boost to domestic innovation, ministers confirmed that venture capitalist James Wise will chair the newly formed Sovereign AI Unit, backed by nearly £500 million to scale British AI capabilities.

The unit will convene government, investors and industry leaders and aims to become the primary vehicle for funding high-growth start-ups and scale-ups.

The government also pledged to expand access to computing resources by offering additional free compute to researchers and young companies and launching the process to spend up to £250 million on new infrastructure.

A separate £137 million strategy for AI-driven scientific discovery will target advances such as accelerating drug development. Its first mission will focus on using AI to speed the creation of new treatments, aiming to deliver faster breakthroughs to patients.

Kendall said international investment commitments demonstrated renewed global confidence in the UK.

"We're determined to do even more to ensure we are backing British businesses, workers and researchers to benefit from the opportunities AI brings," she added.

"This is about bringing jobs, opportunities and hope to the people and places that need it most."

Chancellor Rachel Reeves described the package as a cornerstone of Labour's economic strategy.

"This government promised to unlock growth and that is exactly what we are doing."

"Today's confirmation of our fourth AI Growth Zone is our Plan for Change in action - creating thousands of jobs and unlocking new investment for local communities in the industries of the future, cementing our position as Europe's leading tech sector."