UK Government earmarks £2 billion for AI Action Plan

UK Chancellor Rachel Reeves this week unveiled a £2 billion AI-focused initiative as a core element of her 2025 Spending Review. The AI Action Plan will support home-grown AI – it aims to drive public-sector transformation, boost the UK's tech sector and affirm the country’s role as a global leader in AI and advanced technologies.

Reeves tied AI investment to a broader goal of delivering government efficiency savings of £14 billion by 2028/9 through automation of administrative tasks in the NHS, the Ministry of Justice and the Department of Work and Pensions. She told Parliament: “Homegrown AI has the potential to solve diverse and daunting challenges, as well as the opportunity for good jobs and investment here in Britain.”

Here’s more detail on the Chancellor’s announcement:

• £2 billion for the AI Opportunities Action Plan  - including a 20-fold increase in support for compute capacity, with £160 million for TechFirst to ensure people have the right skills to deliver technological change. 

• Up to £10 billion investment in NHS technology and digital transformation by 2028/29. This is part of an extra £29 billion per year package for the day-to-day running of the health service.  
• An extra £1.2 billion for the Department for Science, Innovation and Technology– much of which will be investments in AI to improve the delivery of public services – an increase of 7% on current budget.
• £22.6 billion per year by 2029 for R&D to support the government’s forthcoming modern Industrial Strategy. The Chancellor said: "We want high-tech industries in Britain today to continue to lead the world in the years to come..  we are backing our innovators, backing our researchers and backing our entrepreneurs."
• £1.2 billion a year to support training and apprenticeships for over a million young people. Said the Chancellor: "We must give our young people the skills that they need to contribute to our national success as scientists, engineers, and designers, as builders, welders, and electricians."  

Reactions to the plans have been mixed. Commentators broadly welcomed the investment in AI and R&D as a positive step, recognising the potential of these technologies to drive economic growth and improve public services. In the Financial Times, KPMG's Chief UK Economist Yael Selfin cautioned that AI‑driven savings may be hard to achieve, citing potential gaps in digital infrastructure and over-optimistic expectations.

Adrian Smith, President of the Royal Society, highlighted the need for a more significant investment, particularly in maths and data education, to address the skills gap and attract global talent. He also expressed concern about the UK's current visa costs and the need to attract and retain top scientific talent.

Paul Johnson, Director of the Institute of Fiscal Studies said: “We now know more about what sorts of projects the government plans to invest in. The focus must now shift to delivery and avoiding the all-too-common project over-runs.”

The UK is widely considered a global leader in AI research and policy, but generally lags in commercialisation and scale when compared with countries like the US and China. For example it is home to DeepMind, the Turing Institute and many world-class universities and research bodies, but doesn't have the AI-first unicorns found in the US, China or the EU. Competing with the scale and commercial strength of the US and China will require greater investment in UK infrastructure, as well as talent retention, and industrial AI adoption.