Quantum computing and AI to get £2.5bn to stop UK tech ‘drifting abroad’, Reeves vows

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Faisal Islam,Economics editorand

Mitchell Labiak,Business reporter

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Chancellor Rachel Reeves has told the BBC she wants to stop top British technology firms and scientists “drifting abroad” to make money.

She said she wants “the pattern to end”, adding that the government was investing £2.5bn in quantum computing and artificial intelligence (AI).

At a lecture to business leaders in London later on Tuesday, she will say this investment as well as closer ties with the EU and greater regional powers will help boost sluggish economic growth.

The Conservatives said the government “wanted to row back on Brexit” and criticised it for “blaming anyone but themselves for their economic failures”.

Many tech firms that start in the UK end up moving their businesses overseas, often to the US.

Some of the suggested reasons for this are poor investment from the UK government and pension funds; the perceived weakness of the London Stock Exchange; and better tax breaks elsewhere.

Speaking to the BBC at the National Quantum Computing Centre in Oxfordshire, Reeves said her UK growth plan showed the benefits of stability and a “strategic and active state”.

Quantum computing is considered much more powerful than regular computing because it can store many times more information, which is why some see it as the next big breakthrough in technology and key to economic growth.

Ashley Montanaro, co-founder and chief executive of Phasecraft, a British tech firm which develops quantum algorithms, said there had been some high-profile examples of UK-based firms being acquired by larger overseas companies, or their founders moving to the US.

“So I think the chancellor is right to be alert to this and to look at mechanisms to ensure the UK remains a fantastic place for quantum computing,” he told BBC’s Today programme.

It has historically been easier to secure large amounts of capital overseas, particularly in the US, Montanaro said, which can tempt companies to move abroad.

But he cited a recent shift, “where the UK is seen as a really fantastic place to build these companies”.

In her Mais Lecture at the Bayes Business School in the City of London, Reeves will promise to achieve “the fastest AI adoption in the G7” thanks in part to government investment in British tech. She will add that quantum computing is to create 100,000 UK jobs.

However, Reeves’ growth plans could be challenged by the fallout of the US-Israel war with Iran.

Experts fear inflation could jump and the economy could sink due to the oil price surge which has happened since the conflict began, with some urging the UK government to drill for more oil in the North Sea in response.

Reeves said a decision on the controversial Rosebank and Jackdaw North Sea oil developments would come “soon”.

Asked if the schemes should now be fast-tracked because of rising fuel prices, she said “those are decisions to be taken across government”.

While she did not argue for new exploration, she said many countries were now looking to step up production.

“Every country has got to play their part in ensuring energy supplies are there when we need them… particularly at a time when the Strait of Hormuz in effectively closed” she said, and pointed to production increases in Canada and Norway.

She also said plans to reintegrate the UK into European energy markets, part of the post-Brexit reset, would also help keep energy prices down.

In her lecture on Tuesday, she will argue that the UK should align in more areas of the economy with EU rules “where alignment is in the national interest, where it is good for business and good for jobs”.

This is already planned to occur in food and farm standards to remove almost all post-Brexit red tape, but the chancellor’s words could signal a wider plan to negotiate alignment in areas such as chemicals and manufacturing.

Shadow chancellor Sir Mel Stride said the lecture would contain “more detail on Labour’s plan to drag us closer to the EU”.

“Under increasing pressure having mismanaged the economy, Reeves would rather point the finger at Brexit than accept their poor choices have been a disaster for our economy,” he added.

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