More than $202bn (£150bn) worth of US investments into the UK were unveiled last week. The announcements were timed to coincide with US President Donald Trump’s historic second state visit to the UK, during which his friendly relationship with UK Prime Minister Keir Starmer and the royal family was on full display.
Of these commitments, more than £30bn are in the technology sector, where major industry players are investing in building AI infrastructure and developing research and development (R&D) capabilities in the UK.
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OpenAI, for example, is launching Stargate UK to “strengthen the UK’s sovereign compute abilities” in partnership with Nvidia and UK-based data centre provider Nscale. Nvidia is separately committing to spending up to $15bn in R&D in the UK, working with partners CoreWeave and Nscale. However, the bulk of the tech investment is coming from Microsoft, which committed $30bn to building AI infrastructure in the UK in the next four years.
The UK Government says these investments “will bring new healthcare breakthroughs, clean homegrown energy, and more investment into local communities and businesses in Britain and the United States”. Business and Trade Secretary Peter Kyle called it a “huge vote of confidence in our economy”.
However, reactions have been mixed. The prospect of building massive hyperscalers in the UK has already gotten pushback because of the water and energy-intensive nature of these developments. The potential of US tech to further crowd out the domestic tech industry is also a long-standing concern.
Nick Clegg, former president of global affairs at Meta and the UK’s former deputy prime minister, called the multibillion-dollar agreement “sloppy seconds from Silicon Valley”. Clegg highlighted that these investments would reinforce the UK’s tech dependency on the US, highlighting that US companies stood the most to gain. “It is all one-way traffic,” he said.
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By GlobalDataInvestment Monitor asked multiple analysts for their thoughts on these investments. Their answers suggest a more nuanced picture and touch on the secondary industries that could benefit from these investments, the relatively low costs in the UK for US tech companies, a lack of cooperation with UK organisations and more.
Eugenia Perozo (EP): Do you think the tech deals will ultimately benefit the UK or are they “sloppy seconds”?
Christopher Granville (CG), managing director at TS Lombard: Foreign direct investment (FDI) in highly productive and technologically advanced sectors must be a net benefit for the recipient in all the usual ways. Not just the presence of employing strategic investors like Google’s venture north of London, and the employment that comes from that, but all types of transfer of know-how, skills development and so on. FDI that fits those criteria, which is certainly the case here, has to be economically beneficial.
There are all types of collateral stimuli to ancillary industries and suppliers, such as in energy. One of the other projects discussed on the Trump state visit was mutually beneficial cooperation in nuclear modular reactors, which are certainly relevant to the required energy sources for data centres.
EP: The US has tried to condition many tariff deals on countries giving favourable conditions to big US tech companies (with some success). While the UK has so far resisted US pressure to scrap the Digital Services Tax (DST) and the Online Safety Act, do these investments increase the risk of that happening?
Laura Petrone, principal analyst of Strategic Intelligence at GlobalData: I haven’t seen a clear intention of making the DST or the Online Safety Act a part of these negotiations. Yes, there is a pressure from the Trump administration, but there is also a lot of rhetoric.
This is legislation that is also quite popular among the UK public, because the impact that access to very, very harmful content has had on young people and children’s mental health is a very sensitive issue. I don’t think it would be a wise move from the government’s side to compromise on this. The same is true for the DST. It is more symbolic for the Trump administration, and it is also symbolic from the UK side to show that they are not going to compromise on tax or digital sovereignty.
There is also AI regulation. I see some more compromise on this side. The UK doesn’t have a regulation, but it is trying to work on a light-touch bill. So how this will be shaped might be influenced by the dispersion from the US administration.
CG: I would see zero chance of the UK Government adjusting the Online Safety Bill. Given the optics, this would be perceived to have been under pressure from the Trump administration. If that turns out to be a deal breaker for some of these FDI projects, so be it. I don’t believe that would be politically or socially sustainable in the UK. As for taxation, my conclusion would be the same, but softer, because tax rules can always be negotiated and discussed. In fact, the whole point about the DST, both from the UK and from the EU, is that such taxation is explicitly designed to be a provisional stopgap until there is a fully implemented multilateral framework for taxing the corporate income of arbitrage-fuelled companies in tech, pharma and other sectors. The DST framework is not something that is designed to be there forever.
In February, following US Vice-President JD Vance’s visit to Europe, the EU signed up to a safety charter for AI; the UK did not. The government was therefore signalling it was more open to US integration with the US AI sector, in the hope of getting all those benefits for the UK economy. So, the UK is clearly ready to make some trade-offs to capture US tech investment and US integration – but I simply cannot see that the UK Government would alter its regulation on online safety in a way that was perceived to have been necessary to obtain this FDI in tech from the US, even despite that background.
Alexandros Xenofontos (AX), economist at TS Lombard: US tech companies want to be in the UK. It is an attractive investment because we do have the talent, resources and cheaper labour costs compared to Silicon Valley salaries, with the same amount of skills. The UK can give some pushback to US demands on the Online Safety Bill or the DST because it ultimately knows that it is an attractive location in the tech sector.
EP: There currently seem to be two versions of the UK from a business perspective. On the one hand, domestic businesses are struggling with rising costs on all fronts. On the other hand, US tech companies seem eager to make these investments here. What do you make of that discrepancy?
AX: US companies are finding it quite attractive to invest in the UK because they have a lot of dry powder; therefore, they have the capacity to invest in the UK, where there hasn’t really been a lot of investment. They are leveraging the lack of investment, swooping up market share and talent, becoming more competitive. It is the right time for them. It is relatively cheaper to do it in the UK than in the US.
