The Labour Party manifesto promises a pro-business environment that supports innovation, investment and high-quality jobs. Most agree that AI development has become central to this ambition of supporting innovation, economic growth and global competitiveness, demonstrated by Labour’s broad pledge to “ensure our industrial strategy supports the development of the AI sector”.
This promise goes some way to meeting Prime Minister Rishi Sunak’s government’s long-held ambition to position the UK as a global stakeholder in the development of AI regulation, which saw his party host the world’s first AI Summit at the historic Bletchley Park in November 2023. An alumni of the prestigious Silicon Valley-based Stanford Business School, Sunak’s technology investment background lends weight to his claims of understanding the economic significance of a technology-first nation.
Go deeper with GlobalData
According to GlobalData’s report entitled ICT Implications of Major Political Party Manifestos, although technology is not one of Labour’s five key missions, “it appears to offer the strongest commitment amongst the major parties to advocate the role that technology can play in enabling change”.
Within this commitment the Labour manifesto outlines the party’s seemingly more hands-on approach to AI than Sunak’s Conservative Party to “ensure the safe development and use of AI models by introducing binding regulation on the handful of companies developing the most powerful AI models and by banning the creation of sexually explicit deepfakes”.
The party also proposes the creation of a new Regulatory Innovation Office bringing together existing functions across government to “update regulation, speed up approval timelines and co-ordinate issues that span existing boundaries”.
While this sounds compelling, says GlobalData thematic intelligence research director Josep Bori, the devil will be in the detail. “How they manage the overlap between this new regulatory body and existing ones, as well as the transition period will be crucial if it has to have an impact within the short-term timeframes governments tend to live by,” he says.
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By GlobalDataWhat limited detail on AI strategy the manifesto presents seems very much in line with the EU AI Act, which largely regulates generic and systemic general purpose AI models, or the US Executive Order on the Safe, Secure and Trustworthy Development and Use of Artificial Intelligence, which aims to regulate models based on size and capabilities, according to Bori.
It does signal somewhat of a departure from the Sunak government’s approach to limited AI regulation to avoid stifling innovation. “Although it was never as simple as that,” says Bori.
Bori notes that without a regulatory framework in place, there is significantly more uncertainty, which in turns scares investors and also stifles innovation. “It is all about the right balance, and being agile to update regulations if they prove to be too onerous,” he explains.
When Labour provides more detail on its AI strategy, if indeed it has one, the question of Brexit may need to be interrogated once again. “How aligned with the EU AI Act will this future Labour AI strategy need to be to ensure the flow of investment, human capital and trade between the UK and its closest and largest market?” asks Bori.
Labour’s pledge to the data centre sector
As well as ensuring that Labour’s industrial strategy supports the development of the AI sector, the party made a manifesto promise to remove “barriers to new data centres”.
The UK faces many planning barriers to data centre development, particularly because data centre construction is linked to real estate development and planning laws, according to senior GlobalData analyst Beatriz Valle.
“Anything that is related to real estate in the UK is incredibly complex, and subject to financial speculation and some of the more archaic laws in the planet,” says Valle. Therein lies the problem for any government set on facilitating data centre construction.
There are several barriers to data centre development: securing a connection to the power grid is a major hurdle, planning permission issues are a problem because local plans often don’t specifically allocate land for data centres, and data centres don’t generate as many jobs as traditional industries, potentially leading to local authorities rejecting applications, says Valle, who adds community opposition and sustainability issues to the long list of hurdles.
“The main problem is the lack of a national strategy for data centres, which is leading to fragmented policies and lack of coordinated support for the industry,” says Valle.
Bruce Owen, UK managing director at data centre giant, Equinix, says, in principle, the company welcomes Labour’s pledge to streamline planning processes for the construction of data centres. “However, we seek more detailed information on this policy to fully understand its implications for our business operations and future planning,” he adds.
The current planning framework, which often categorises data centres under building categories of B8 (Storage and Distribution) or sui generis (unique use), can be restrictive, according to Owen, who says a more tailored approach to planning policy could significantly improve the development process.
“In practice, their focus needs to extend beyond just planning and development of land. Reducing planning timelines, particularly for renewable energy projects, and expanding battery technology beyond electric vehicles will be vital steps for the tech sector in the UK,” says Owen.
While data centre construction is not an issue that is top of mind for the average voter, the importance of the sector to the success of the UK’s digital economy cannot be overstated.
A clean energy superpower enabled by technology
Labour has pledged £7.3bn ($9.33bn) over the course of the next Parliament, through the creation of a National Wealth Fund to make the UK a clean energy superpower. Labour’s pledge to align the fortunes of the country with global net-zero targets was a centrepiece of its industrial plan for the UK.
The UK’s digital sector contributes around 7% to GDP. Taavet Hinrikus, partner at VC fund, Plural, and co-founder of fintech, Wise, welcomes Labour’s plan for a National Wealth Fund to capture long-term value, as well as the incoming government’s commitment to innovation to solve the climate crisis.
“To succeed, the new government must invest in infrastructure, resources and industries shaping the future, from data centres to fusion energy. We must also ensure that the most talented individuals are not deterred because of high visa costs and red tape. While progress has been made, consistent policy and regulation are needed to unlock the full potential of the startup tech sector and drive future growth,” says Hinrikus.
A clean energy superpower will be driven by technological innovation. If fact, many of Labour’s manifesto promises will depend on the UK’s ability to draw on its technology sector. A focus on homebuilding intersects with the party’s clean energy aspirations.
Nicola Battey, director of sustainability at Hometree, says a clean tech nation starts with how the UK powers its homes. “When 18% of our carbon emissions come from heating our homes, solving this will be critical to transforming the UK’s emissions,” she says.
Electricity is almost four-times the cost of gas in the UK, compared with Europe where it is closer to twice the cost. Battey notes that helping to create the groundwork for a more compelling customer proposition is something the new Labour Government will have to face.
“This requires putting in place the infrastructure to decarbonise people’s homes such as removing the upfront cost of solar panels, heat pumps and batteries, upskilling engineers and installers to meet demand, driving education around these solutions and solving the differences in energy prices.
“Government support, such as the Boiler Upgrade Scheme, does help remove some of the upfront cost to the consumer and this will go some way to driving the UK’s cleantech ambitions; however, customers will need continued support for the foreseeable future.”
Climate technology venture fund Kiko Ventures founding partner Jamie Vollbracht welcomes the promise to work with pension funds and safeguard the incentives for retail investors to back innovative technology. “This is a move that could bolster the UK’s position in green finance and we admire the ambition to put clean energy at the centre of the economy, creating thousands of jobs,” says Vollbracht.
Kiko Ventures agrees that there is an opportunity now for the UK to work to become more energy independent through more clean energy, while also laying the groundwork for a thriving, job-rich economy fuelled by these technologies over the next decade.
“We are still concerned about the damage that being outside the EU has done to academic collaboration and deep science research, which is necessary to solving the biggest climate change challenges, but we urge Labour to make the most of the tech and venture-backed sector it inherits and support the bold founders who are building the solutions that can pull the UK and Europe out of the man-made climate crisis,” says Vollbracht.
Financial services technology: A UK success story
The Labour manifesto acknowledges the importance of the UK’s financial services sector and pledges to “create the conditions to support innovation and growth in the sector, through supporting new technology, including Open Banking and Open Finance and ensuring a pro-innovation regulatory framework.”
Veteran UK venture capitalist and entrepreneur in residence at Cambridge University, Ewan Kirk, says that while Labour has pledged a pro-innovation regulatory framework through supporting new tech, the details need to be ironed out.
“At the core of this will be Labour’s awareness of where their blind spots are. No government is omniscient, and they will have knowledge gaps in certain areas – particularly in STEM, innovation and entrepreneurship,” he says.
“The key is being frank about these known unknowns, and reaching out to key figures from industry who can help them dodge upcoming landmines and spot emerging opportunities on the horizon,” he adds.
Kirk advocates for business and regulators to get together to build sandbox systems for testing new technologies in a flexible but safe way, just like what happened with the Financial Conduct Authority’s sandbox approach. “Without insights live-tested in the private sector, new frameworks and regulations will likely hamstring rather than support the financial services industry,” says Kirk.
“The UK has put in place many of the necessary conditions for financial innovation to thrive and deliver real benefits to consumers. Initiatives such as Open Banking have started to reap benefits for consumers. The Labour Government should build on these foundations and put in place a regulatory framework that allows future innovations to be rolled out without compromising the safety and security of customers,” he adds.
Labour promises to scrap short funding cycles for key R&D institutions in favour of ten-year budgets that allow meaningful industry partnerships to keep the UK at the forefront of global innovation, according to its manifesto. The party promises to work with universities and spin-outs and ensure that start-ups have access to finance.
“It is not possible to create an innovative, pro-growth economy without the high-calibre technical talent to support it, including top researchers within our university systems, world-class students, as well as ambitious tech entrepreneurs to translate that innovation into commercial opportunities,” says Kirk.
Kirk refers to the Sunak government’s “self-defeating” anti-immigration policy and punitive policies towards overseas students as the cause of a brain drain, particularly in tech, where the UK is reliant on overseas developers, designers and engineers. “The best innovation structures need the best talent, so the Labour government needs to reverse course, and start drawing in these vital overseas students,” he adds.
