October 12, 2023

UK’s Labour has a plan for British startups — but its AI policy is up in the air

Keir Starmer’s party promises to unlock billions in investment for business and infrastructure

Labour party leader Sir Keir Starmer

The UK’s Labour party, which is hoping to be elected to government in the next election, is making big promises to startups — but founders and investors want more clarity on its AI plans.

At the party’s conference in Liverpool this week, which was attended by British startups including Wise and Revolut, and VCs from a16z and Octopus, Labour officials promised to unlock patient capital, support university spinouts and ensure the next technology wave benefits everyone in the UK. 

Labour’s leader Sir Keir Starmer (or a member of his shadow cabinet) is also expected to give a keynote speech on tech just days before the government’s AI Safety Summit on November 1-2, in a bid to steal the thunder from prime minister Rishi Sunak. 


“The capacity and thinking on tech within Labour has really come up the curve and is growing very rapidly at the moment,” says Kirsty Innes, director for tech policy at think tank Labour Together. “Tech is going to be absolutely crucial to all the public services reform that Labour wants to do. It might not be the number one doorstep topic, but we’re not going to solve any of the big problems without getting to grips with tech.”

“Labour is positioning itself as a friend of the sector,” says Tom Adeyoola, an entrepreneur who co-authored a review into startup funding for Labour and attended the event. “The big thing that businesses want is stability. There’s been a lot of chopping and changing of policies, which has been difficult for making investment decisions.”

Let the money flow

Increasing investment as a share of GDP was a core part of shadow chancellor Rachel Reeves’s speech on Monday. 

That could be good news for startups: 

  • Labour estimates this should add an additional £50bn to the UK’s GDP every year — with some of that capital flowing into new factories and research labs. 
  • Labour has proposed an £8bn National Wealth Fund for new green infrastructure to invest in gigafactories, clean steel plants, renewable-energy-ready ports, green hydrogen and energy storage. 
  • Of that money, £2bn would be spent on eight new gigafactories in the West Midlands, the east, the north, west and the southwest of England, and £1bn would fund net-zero industrial clusters.
  • Labour also plans to publish a review of UK infrastructure, including laboratories, 5G and battery factories.

“We lag well behind our peers for private sector investment as a share of GDP, with tens of billions of pounds less spent on new machinery and infrastructure,” Reeves told the conference. “British businesses — from life sciences to the creative industries, from digital to financial services — can and do lead the world. But they have been held back by the chaos and instability of this government.”

At the conference, Labour pledged to implement two of the recommendations from the startup review — a set of policy recommendations on how to make Britain a world-leading startup hub. 

In order to increase the number of university spinouts in the UK, Labour says it will: 

  • Create a new founders track “giving more flexibility to people who want to establish spinouts and want to keep a higher stake of the equity”. 
  • Publish annual data on the performance of university spinout support in a bid to increase transparency around what each institution is doing to support the ecosystem.

A party official confirmed the startup review will be the roadmap for Labour’s startup policy, and it’s likely that more of its recommendations will become official Labour policy in the coming months. 

That’s good news for the sector, because the review stressed the need to unlock more patient capital by, for instance, making it easier for pension funds to invest in startups. It also proposed drawing on the experience of the Tibi scheme in France, which was launched in 2020 to address the lack of willingness among French institutional investors to invest in their national tech industry. The scheme is credited with having pumped €6bn into French tech companies by December 2022 — without any government spending.

Of the 1,166 active spinouts in the UK, 56.5% are still at seed stage, according to a report by the Royal Academy of Engineering. All combined managed to raise 9.11% of all equity finance raised by British companies in 2022. But founders often complain universities demand too large a stake in spinout, hampering their ability to attract VC funding later on.

Labour also announced at the conference that it plans to set out 10-year research and development budgets — which at the moment only cover a 3-year horizon — to match the long timelines of technological discoveries and R&D projects. 

Open questions

As rumours of a snap election by next autumn swirl around Westminster, the party is fast becoming ready for power. For the past year and a half, Labour has ramped up its engagements with the startup community and has already appointed a team to write its general election manifesto, which is expected to include a chunky section on tech. But questions remain over future tech regulation.


Tulip Siddiq, shadow economic secretary to the Treasury, has been vocal on the need to regulate blockchain technology to prevent Britain from becoming the “Wild West” of cryptocurrencies, suggesting this might feature in the party’s policy plans. 

Labour could also inherit some unfinished business if the UK digital competition bill or the data protection bill, currently going through the UK parliament, don’t complete their passage before a general election is called. 

But the biggest open question is AI. Party insiders say it is appropriate for the government to work on AI safety guardrails, but argue the ruling Conservative party has been carried away with this aspect of the technology and neglected more immediate risks such as bias, impact on workers and intellectual property breaches.

Labour is debating options to protect workers’ rights in the gig economy and regulate the use of algorithms in the workplace. Hinting at the importance of this area of work, shadow science secretary Peter Kyle says the party is committed to making sure all British people “can ride” the next innovation wave, and stresses, “the interest of working people will be baked in everything the next Labour government does”.

As more impactful AI products reach the market in the near term, Adeyoola says, Labour will need to work out who is going to accrue the economic benefits. The investor who put their money into the technology or the first human who edited or tweaked the content it produced?

“With the big leap forward, capital is going to accrue all the economic benefits and therefore you get a much bigger rise in inequality,” he adds. “How are you going to account for that? That’s a question that hasn’t been asked or debated anywhere. If you go back to the industrial revolution, it took 50 years for average living standards to rise. In two years’ time, it will be a hot topic.”

Cristina Gallardo

Cristina Gallardo is a senior reporter at Sifted based in Madrid and Barcelona. She covers Europe's tech sovereignty, deeptech and Iberia. Follow her on X and LinkedIn