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On 13 January 2025, the Government responded to the AI Opportunities Action Plan, developed by tech entrepreneur and Chair of the Advanced Research and Invention Agency (ARIA), Matt Clifford, at the request of UK Science Secretary, Peter Kyle.
With its world-class universities and research institutions and a large AI start-up ecosystem, the UK is in a strong position to become a leader in AI. The Action Plan reflects the Government’s ambition to take full advantage of these strengths and to turbo-charge economic growth and unlock wider societal benefits.
For the plan to be successful it will require significant investment. The Government is hoping to harness investment to enable growth of the UK sovereign supercomputing infrastructure and to encourage further investment in AI startups, and much of the investment in AI startups is likely to come from venture capitalists and angel investors.
AI is already an extremely attractive sector for investors and the Action Plan has the potential to unlock further investment opportunities in specific key sectors upon which AI is dependent or which are poised to take advantage of the transformational potential of AI.
Key recommendations of the Action Plan
The plan sets out 50 recommendations including the following key areas:
Building sufficient, secure, and sustainable infrastructure
- 10-year investment roadmap for building the UK AI infrastructure, starting in 2026 with the delivery of a state-of-the-art UK sovereign supercomputing facility and expanding the AI Research Resource (AIRR) capacity by at least twentyfold by 2030.
- Access to affordable and reliable power is critical to enabling AI to be developed and operate. The plan proposes the creation of AI Growth Zones across the UK to accelerate build out of giant-scale AI data centres with access to sustainable and secure energy.
Unlocking data assets
- A major barrier to AI development and training is the limited access to high quality and large scale datasets, particularly for research and early stage developers. To ensure access to valuable datasets, the plan is to establish a National Data Library of open Government data sets and to review the UK’s copyright framework to support AI training data requirements.
- Aligned with this, the Government recently launched a consultation on its proposal to reform UK copyright law in line with current EU law by introducing a copyright text and data mining exception, allowing copyright material to be used by developers training AI for commercial purposes, while still allowing rights holders to reserve their rights and control use of their content and be paid.[1]
Training and attracting talent
- The first stage of the plan is to assess the size of the UK’s AI skills gap and develop a plan to address it.
- Investment will be made in higher education and an AI scholarship programme will be created to attract the absolute best international talent to the UK.
- Talent diversity and improving the gender balance in education, training and employment will bring more skilled resources into the sector.
- The plan also recommends changes to the immigration visa routes to ensure the eligibility criteria is wide enough to attract skilled international AI workers to join UK organisations or start their own businesses here.
Enabling safe and trusted AI development
- The Government will consult on proposed legislation to provide regulatory certainty to help kickstart growth, while ensuring the UK and its citizens are protected from critical risks associated with next generation AI.
- It will establish the AI Safety Institute (AISI) as a crucial statutory body in the AI ecosystem and ensure it is funded to maintain and expand its research on evaluation and pre-release testing of frontier AI models and the development of safety assurance tools.
- All sector regulators will be funded to scale up their AI capabilities and will be required to publish annually how they have enabled AI innovation in their sectors and the Regulatory Innovation Office will be empowered to drive regulatory innovation through behavioural changes within regulators.
Enable public and private sectors to reinforce each other
- The plan proposes to engage the public sector with innovative AI providers for smarter and more agile procurement.
- Changes are proposed to procurement contract terms and the implementation of Competitive Flexible Procedures to accelerate engagement with AI companies and the creation of a single AI Knowledge Hub, to publish best-practice guidance, case-studies and open-source solutions.
What opportunities does the Action Plan provide for investors?
The combination of the various elements of the plan should enhance the environment and opportunities for investors in AI.
In contrast to the EU’s restrictive and obligation-heavy approach, the Government intends UK regulation to lower barriers for AI developers to enter the UK market whilst addressing concerns around higher societal risks presented by new AI models. This regulatory certainty, coupled with lower barriers to entry, should encourage more startups to be established in the UK. The Government’s continued support of tax-incentives such as the EIS and SEIS schemes (for more information see here) and the R&D tax credit regime also create advantages to encourage investment in these early stage AI businesses.
The Action Plan also signals major investment and growth opportunities for investors in data centres, infrastructure and sustainable energy technologies, which are all essential to enabling AI.
Investment opportunities will also be unlocked in a wide range of sectors which can benefit from the transformational nature and economies brought about by use of AI, such as:
- Healthcare and life sciences: AI for drug discovery, diagnostics and operational efficiencies.
- Autonomous systems: such as self-driving vehicles and drones to revolutionise transport, logistics and agriculture.
- Financial Services: the UK’s strong fintech ecosystem is set to benefit from enhanced AI capabilities.
- Cybersecurity: as digital threats become increasingly sophisticated, AI-driven cybersecurity solutions will be in increasing demand.
- Sustainable and green technology: AI for energy optimisation, carbon tracking and climate solutions aligns with ESG-focused investment trends.
- Sustainable agriculture: using AI to optimise crop yield to reduce waste and improve resource management will become increasingly important.
What about the risks of investing in AI?
No opportunity is free of risks and there is no exception for the UK AI Opportunities Action Plan. It is very early days and investors will need to be alert to various risks along the journey, including:
- Execution risks: the plan sets out an ambitious delivery time plan, and the Government will need to press ahead quickly with implementation. Investors will need to keep an eye out for slippage, which could impact on expected returns.
- Public perception and regulation: while the Action Plan focusses on the need to regulate only the most high-risk of AI, as ethical concerns evolve, there may be increased scrutiny or shifts in regulatory approach. It will also be critical for the Government to reach an agreed position quickly with rights holders over the use of their data assets for AI text and data mining. Until regulation emerges, investors will need to stay alert to changes. In the meantime, with the EU having the first-mover advantage, it is likely that many AI innovators will be looking to the requirement of the EU AI Act to guide them.
- Geopolitical factors: competition with these major players in the US and China, as well as the EU, and international political changes, could adversely influence market dynamics for the UK. It will be important that the Government continues to progress trade discussions.
How can these risks be managed?
These risks are largely outside of the control of investors, and it remains key to mitigate against risks in AI investment in the same way as risks are mitigated in any early stage company investment:
- Focus on the team: look for teams with strong technical expertise, leadership experience and a clear vision. Evidence of past business execution and delivery is important.
- Diversity your portfolio: consider investing in different AI sectors to spread your risk and increase your chance of backing a successful startup.
- Assess market fit and scalability: ensure you understand how the solution you are investing in is solving a real and pressing issue, and whether it has the potential to scale. Consider how it will monetise its opportunities. Consider also startups aligned with Government-backed initiatives and funding.
- Be in it for the long term: AI has a long development life-cycle. Typically, you will not be able to exit your investment for at least 5 years, longer in the case of anything in the life-sciences sector, so be prepared to stay for the long term and consider your ability to meet future funding calls.
- Stay informed of ethics and regulation: ensure that your investment is aligned with ethics and regulatory considerations and that they will be able to comply with emerging regulations, ethics and data protection obligations.
- Take legal advice: finally, don’t forget to do your due diligence and take legal advice before making your investment to ensure that you understand your risk and commitment.
Anne Todd is a Partner in Michelmores Commercial team advising on Technology & Innovation. She advises a wide range of businesses developing AI solutions as well as those seeking to procure and deploy them. She is a member of the Society for Computer & Law’s AI Committee.
For more information about joining Michelmores’ MAINstream Angel Investor Network please see here. We are always looking for new investors to match the exciting innovative opportunities available to our network.
Michelmores also aims to support the next generation of entrepreneurs, particularly in areas such as technology and sustainability, via its MiVentures scheme.
[1] https://www.gov.uk/government/consultations/copyright-and-artificial-intelligence/copyright-and-artificial-intelligence
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