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Prime minister Sir Keir Starmer will on Monday promise to make Britain “the best state partner” for artificial intelligence companies in the world, as he tries to boost UK growth prospects against an ominous economic and political backdrop.
Starmer, writing for the Financial Times, will claim Britain’s “values of democracy, open commerce and the rule of law” make the UK a natural location for AI companies to invest, and vows to sweep away planning restrictions and create new “AI growth zones”.
“I am determined the UK will become the best place to start and scale an AI business,” he writes. “I know growth in this area cannot be state-led. But it is absolutely the job of government to make sure the right conditions are in place.”
Starmer hopes to get back on the front-foot after a week in which his economic plans were battered by the markets, leaving chancellor Rachel Reeves potentially facing the need to cut spending or raise taxes to keep her fiscal plans on track.
Reeves, who returns from a visit to China on Monday, will this week “haul in” regulators to tell them to be more ambitious in sweeping away barriers to growth.
Meanwhile Starmer is facing calls from Kemi Badenoch, Tory leader, to sack his City minister Tulip Siddiq, whose position remains precarious after she became embroiled in a property scandal tied to the ousted government of Bangladesh.
Last week Britain’s borrowing costs climbed to close to a 16-year high against a backdrop of sticky inflation and fears that Reeves’ tax raising Budget had contributed to stagnating growth.
The sense of economic gloom was compounded by a survey of UK chief financial officers by Deloitte, which showed that business optimism fell to a two-year low in the fourth quarter.
The survey found that a net 26 per cent of CFOs reported feeling more pessimistic about the prospects of their business than three months ago, marking the first time sentiment has tipped into negative territory since the second quarter of 2023.
CFOs said that cutting costs would be their most likely response to Reeves’ £25bn rise in employer national insurance contributions.
Deloitte said UK corporates expected to cut capital expenditure, discretionary spending and reported the sharpest fall in hiring expectations since the pandemic. Nonetheless, the survey found that confidence is well above lows seen in 2020 and 2022.
Mel Stride, shadow chancellor, told the BBC that “business confidence is falling through the floor because of actions the government has taken” and insisted Reeves should have cancelled her China visit to calm markets.
But one adviser to the chancellor said: “Is he seriously saying she should have scrapped the trip to stay at home over the weekend to address a closed market? It would have rightly been seen by the markets as panic.”
An ally to Starmer said any suggestion that Reeves’ position was under threat was “complete rubbish”.
Starmer continues to believe that Reeves’ October Budget, which sought to stabilise public finances and shore up public services with a £40bn tax rise, will be vindicated in the long run, in spite of the market turmoil.
Reeves is planning her own speech on growth, but it has been delayed until after her trip to the World Economic Forum in Davos later this month.
On Thursday she will summon eight regulators to explain what they are doing to boost growth. In her Mansion House speech in November she told watchdogs: “The UK has been regulating for risk, but not regulating for growth.”