Artificial Intelligence - Britain’s First Concrete Brexit Benefit

Growth elusive, markets skittish, and polling dire - it has not been the best of starts to the new year for UK Prime Minister Keir Starmer. With Britain's productivity lagging 20% behind our developed-world counterparts, the PM's turn to artificial intelligence this week might appear merely the latest desperate reach for economic salvation. Whilst AI may not ease the government's immediate difficulties, it presents Britain with a rare strategic opportunity: the chance to position ourselves between an increasingly erratic American market and an over-regulated European Union.

The context of Starmer's intervention was the launch of the government's AI Opportunities Action Plan, authored by venture capitalist Matt Clifford. The report, which the government has accepted in full, charts a course between innovation and prudent oversight that marks a striking departure from both our European neighbours and our own previous stance. Most significantly, it proposes "AI Growth Zones", areas with expedited planning and regulatory frameworks designed to attract data centres and research facilities. The first such zone in Culham, Oxfordshire, demonstrates substantial ambition, though additional sites around London and Cambridge would be highly desirable next steps.

The shift in tone from the previous administration proves even more remarkable given Labour's own trajectory. Where Conservative ex-PM Rishi Sunak appeared perpetually troubled by hypothetical rogue AIs - hence his hosting of the AI Safety Summit and creation of the AI Safety Institute - Starmer and Science Secretary Peter Kyle have struck a markedly different balance. While maintaining the Institute's role (soon to be placed on statutory footing), they've articulated a preference for context-specific regulation over blanket restrictions. This signals a dramatic reversal for a Labour Party that, mere months ago, chastised the Conservatives for insufficient regulation of technology firms. Whether this speaks volumes about the UK's growth challenge, the cynicism of our politicians, or both, will depend on your perspective. Regardless of the motivation, it’s a better approach than our international peers. 

The contrast with Europe proves particularly instructive. Many cutting-edge AI technologies remain unavailable across the Channel, victims of the EU's poorly conceived "risk-based" regulatory framework. The fact that OpenAI's new video generation model 'Sora' is available in Afghanistan but not in France illuminates the perverse consequences of the bloc's regulation. The European framework, which determines risk levels primarily by model size and computational requirements rather than intended use, fundamentally misunderstands the technology it seeks to govern. The EU insists on pre-emptive safety demonstrations across hypothetical use cases, rather than focusing on actual applications. Such behaviour betrays a regulatory mindset that has already left Europe without any tech firms to rival Microsoft, Google, or Meta.

Across the Atlantic, the outlook appears scarcely more encouraging. President Trump's return heralds an environment characterised by personal whim rather than consistent principle. The rush of tech titans to donate to his inauguration says much about the uncertain climate they anticipate, while the swift liberalisation of social media moderation by firms eager to curry favour suggests the instability ahead. This regulatory vacuum, combined with Europe's over-regulation, creates a clear opening for Britain. Our advantages - world-class universities, English-language dominance, and continued attractiveness to global talent - remain formidable.

The potential rewards justify such ambitious development. JP Morgan estimates that successful deployment of AI by firms could lead to cumulative productivity increases of up to 17.5%. Such a transformative prospect for an economy reflects how it has long favoured importing low-wage labour over technological advancement. The scale of the opportunity has not been lost on the government. Its pledge to increase sovereign computing capacity twentyfold by 2030 demonstrates recognition that technological independence is as crucial as regulatory autonomy. Similarly, the National Data Library initiative acknowledges Britain's unique advantages - particularly in healthcare data - while establishing secure frameworks for their exploitation. Yet these laudable aims throw into sharp relief the fundamental obstacles facing Britain's AI aspirations.

The magnitude of AI's power consumption looms as the most pressing impediment. A single ChatGPT query consumes nearly ten times the electricity of a Google search. The National Grid's prediction of a 500% surge in electricity demand over the next decade, propelled by AI operations, exposes Britain's energy limitations. With per-capita power generation more akin to Brazil's than France's, the disconnect between aspiration and capacity appears stark. Yet this power crisis might prove clarifying. The AI growth zones, beginning with Culham, provide a blueprint for aligning planning reform with energy policy. Whether this model can be replicated at scale and with sufficient speed to meet industry demands may well determine the viability of Starmer's AI ambitions.

These material requirements, however significant, represent merely the most tangible of a broader set of hurdles. The Competition and Markets Authority continues to deter major investment and the broader economic climate hardly helps. Investors are sceptical of a government that came to power without a realistic plan to manage the nation's finances. So far it has been business that has borne the brunt of Rachel Reeves's tax rises and whilst the Chancellor insists she will not be coming back for more, the markets remain sceptical. Success in attracting AI investment will demand more than the erratic politics of Labour's first six months in office.

While Starmer's December directive to regulators demanding pro-growth initiatives recognises the stakes, the government has yet to fully articulate how Britain's technological transformation might reshape its economic model. The pledged reforms mark essential initial steps. But the broader opportunity extends beyond immediate growth prospects. Post-Brexit, Britain's pursuit of a distinct regulatory path between American unpredictability and European caution offers the first compelling glimpse of how independence might yield concrete advantages.

The transformation required is undoubtedly daunting. It demands not just reformed planning processes and expanded energy capacity, but a fundamental shift in how Britain approaches technological development. The public's traditional wariness of both tech giants and infrastructure projects cannot simply be dismissed. Automating jobs out of existence may scare voters, but every previous technological advancement has created more jobs than it has deleted. The alternative - watching from the sidelines as AI reshapes the global economy - appears far costlier. The question is whether Labour can articulate this vision convincingly enough to secure the political space for its realisation, and whether Keir Starmer possesses the resolve to seize this rare moment of technological opportunity.

Image: Flickr/ Number 10 Downing Street (Alecsandra Dragoi)

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