The UK government has announced a new £1.1bn plan to boost the country’s ability to develop, deploy and scale the underlying technology powering the AI buildout, as the race to develop domestic capabilities heats up.
The AI Hardware Plan, announced on Monday by tech secretary Liz Kendall, sets out how the government will back British companies developing chips and semiconductor technologies.
The global AI chips market is expected to reach $1tn in the early 2030s, with VCs funnelling capital into the sector in recent years. European startups working on AI compute, hardware and data centres raised €1.6bn across 39 deals in 2024; in 2025 they raised €4.3bn across 61 deals, according to Sifted data.
The government’s plan to ensure Britain captures a slice of that market includes £750m for a new national AI supercomputer, which it says will be one of the most advanced in the world when deployed in 2030.
Of that money, £400m will go towards buying next-generation semiconductors, including inference chips — those needed to run AI models; £150m will be used to buy novel chips from startups and British companies already working on chip design.
“AI is the defining currency of economic and hard power in today’s world and the countries that control the hardware behind it will hold the keys to the future,” Kendall said. “The UK is already a global leader in chip design, and I believe this is a race Britain can win.”
She added: “To do that, we must back more British AI, and that means investing in the chips, computing power and skilled people behind it.”
A new fund, developed by the UK’s Department for Science, Innovation and Technology (DSIT) is also being launched. It will be led by Silicon Valley investors Playground Global, whose partners include Pat Gelsinger, the former CEO of Intel. Playground will also open an office in the UK, its first outside the US.
The fund is backed by up to £150m from the British Business Bank, the UK’s economic development bank, and will invest in UK-based AI hardware companies.
There’s also money to help companies prove their technology, with £20m being used to expand the Scaling Inference Lab, delivered by ARIA, an R&D funding agency, and CommonAI, a non-profit.
It will help companies prove their technology, attract investment and secure partnerships with global tech companies.
British photonics startup Oriole Networks is one example of a company which has benefitted from the lab, working with chip giant AMD to deploy an AI system that uses light rather than electrical signals to move data between chips, boosting the performance of UK data centres.
