UK Budget 2025: AI bets, startup support - what it means for government
The Autumn Budget leans into AI, chips, and scale-ups while tightening tax policy elsewhere. It signals intent, but not a complete plan. For those in government, the question isn't "Is this good?" It's "What can we make happen in the next 12 months?"
AI hardware gets a foothold
A £100 million scheme will purchase chip technology from UK AI-hardware firms. The aim: secure domestic capability for defence, life sciences, and financial services, and support the UK's Sovereign AI ambitions. Done well, this anchors supply, creates early demand, and keeps know-how onshore.
- Action for departments: line up pre-commercial procurement and pilot contracts with UK compute vendors. Tie them to measurable outcomes (latency, throughput, security profiles) and publish results.
- Coordinate with defence, NHS, and financial regulators on shared standards for security, provenance, and model evaluation so purchases are reusable across sectors.
More fuel for scale-ups: EIS, VCT, and EMI
The Budget lifts EIS and VCT limits (up to £10 million annually and £24 million total, with higher ceilings for knowledge-intensive firms). EMI reforms simplify options and raise value caps, making equity a stronger hiring tool. This could slow the drift of deep-tech and biotech talent abroad.
- Action for BEIS/HMT/BBB: cut the friction. Speed up EIS/VCT advance assurance and publish target timelines. Pair with SBRI-style challenge funding to pull private capital into priority missions.
- Issue standard guidance for ALBs and public bodies engaging scale-ups that use EMI, so procurement and HR don't become blockers.
For reference: EIS policy and process details are maintained by HMRC. See the official guidance.
LSE gets a nudge on IPOs
A three-year exemption from stamp duty for new LSE listings is meant to coax more UK tech companies to list at home. If pension capital and liquidity follow, the UK can rebuild a credible exit path without defaulting to New York.
- Action for HMT and regulators: align listing reforms with pension allocation changes so there's actual domestic demand on day one.
- Work with the British Business Bank and UKIB on an "anchor allocations" approach for qualified listings to signal confidence.
Background on the listing journey: London Stock Exchange overview.
The friction: taxes that bite growth
Industry voices are split. Greg Cox, Co-Founder and CEO of Quint Group, argues that hiking dividend tax, freezing income tax thresholds, and tightening salary sacrifice rules "add up to a stealth tax on growth," weakening cash flow for firms that need to invest and hire.
He warns this penalises savers and early investors and risks draining energy from fintech and other capital-intensive sectors. His counterpoint is pragmatic: lean into incentives that work (EMI, listing relief), and keep pushing for a simple, ambitious regime that rewards long-term risk.
What government should do next
- Run 90-day AI pilot sprints in priority departments with clear KPIs (cost per task, processing time, error rates, security posture).
- Publish a cross-government compute demand forecast to shape the chip procurement pipeline and inform private co-investment.
- Set a target share of eligible procurement for UK SMEs and AI firms, with transparent reporting by department.
- Standardise AI assurance: model testing protocols, red-team processes, and data governance so solutions can move across agencies without rework.
- Accelerate EIS/VCT case handling; target service levels and report monthly performance.
- Coordinate with the FCA and LSE on a pipeline of ready-to-list companies; align regulatory reviews to reduce time to market.
Metrics that will tell you if it's working
- AI hardware orders awarded to UK firms and time from award to deployment.
- EIS/VCT deal volume, average round size, and processing times for advance assurance.
- Share-option uptake under EMI and average time to exercise/liquidity.
- Number of UK tech IPOs, stamp-duty savings realised, and post-listing domestic ownership.
- Net migration of scale-ups (HQ moves in vs. out) and R&D spend growth.
Risks to watch
- Chip purchases that fragment standards or lock in to single suppliers without performance guarantees.
- Tax changes that cool angel and seed activity just as late-stage capital is getting tighter.
- Listing relief that lifts supply without matching demand from pensions and retail, leading to weak aftermarket performance.
- Policy silos across HMT, DSIT, MoD, DHSC, and regulators slowing approvals and spend.
Bottom line
The Budget points in the right direction on AI and scale-ups, but intent won't move the needle by itself. Execution will. If departments convert these signals into contracts, standards, and faster approvals, the UK can turn policy into outcomes: more compute, more capital, and a healthier path from startup to IPO.
Upskilling note
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