Reeves bets big on tech amidst exodus concerns
Spending Review bookmarks billions for tech
Rachel Reeves’ Spending Review promises billions of pounds for AI, R&D and the Department for Science, Innovation and Technology.
Chancellor Rachel Reeves has unveiled a record-breaking tech and innovation-led Spending Review, committing tens of billions of pounds to cutting-edge industries in an attempt to reassert the UK's role as a global leader in AI and advanced technologies.
In her first Spending Review since becoming Chancellor, Reeves pledged to raise R&D funding to £22.6 billion annually by the end of the review period, a level not previously reached in British fiscal history.
A significant slice of that – £2 billion – will directly fund the government's AI Action Plan, led by Technology Secretary Peter Kyle.
The Department for Science, Innovation and Technology (DSIT), under Kyle's leadership, emerged as one of the biggest winners, with its budget increased to £16.5 billion, a 2.8% rise in real terms between 2023/24 and 2028/29.
This pivot toward innovation aligns with Prime Minister Sir Keir Starmer's message at London Tech Week this month, where he championed Britain's ambition to become "an AI maker, not an AI taker."
Yet, the government's bullish push into the future of tech came against a backdrop of mounting market anxiety. Within days of Starmer's speech, three major tech firms – Alphawave, Oxford Ionics, and Spectris – announced moves away from the London market.
Alphawave and Oxford Ionics, both listed in the UK and deeply rooted in its innovation landscape, were acquired by US tech firms, adding to a combined £6.3 billion in merger and acquisition transactions.
Testing equipment group Spectris also said it was "minded to accept" a takeover offer from US private equity giant Advent.
In response, Reeves unveiled a range of funding tools aimed at retaining and growing homegrown firms.
This includes a £6 billion startup support fund and an expansion of the British Business Bank's financial capacity to £25.6 billion, designed to provide growth-stage businesses with increased access to debt financing and start-up capital.
Beyond tech, Reeves' spending package offered a broad economic stimulus focused on advanced industry, green power and national infrastructure.
Around £16.7 billion has been earmarked for nuclear energy projects, with £14.2 billion allocated for the construction of the Sizewell C power plant in Suffolk.
The review also allocated funds to bolster technical skills and domestic talent pipelines in areas like modern engineering, part of a broader industrial strategy to future-proof Britain's economy – something we have questioned the lack of in past Budgets.
Meanwhile, the NHS received one of the largest spending boosts, with a pledged cash increase of £29 billion by 2028, equating to a 3% year-on-year rise for three years. This will bring the Department for Health and Social Care's budget to historic highs, albeit at the cost of cuts to several other public services not explicitly named.
Commenting on the Spending Review Jonny Williams - Chief Digital Adviser - UK Public Sector at Red Hat - said the funding “is a chance to strengthen the UK's position in technology and innovation, if the right foundational pieces are put into place.”
He noted that lasting impact “will depend on delivery,” stressing the importance of the digital infrastructure investment, open standards and human skills.
Daniel Pell, VP & Country Manager for UKI at Workday, also welcomed the investment in training and apprenticeships. He added that these, and measures like the TechFirst initiative the Prime Minister launched earlier this week, “will bring digital skills and AI learning into classrooms and communities."
Andrew Lloyd, MD at Search Acumen, said, “After years of missing the boat of recent ground-breaking advancements in digitalisation...the government is finally beginning to embrace the wealth-generating potential of tech as Ministers grapple with the serious challenge of delivering growth while managing tight budgets.
"There's a lot that can be done with a £2 billion spending commitment to turbo-charge AI innovation. Similarly, the Digital and AI Roadmap could have a real transformative impact on enhancing public services."