AI could boost UK economy by 10% in 5 years, says Microsoft boss

Microsoft says its new $30bn (£22bn) investment in the UK’s AI sector – its largest outside of the US – should significantly boost Britain’s economy in the next few years.

The package forms a major part of a £31bn agreement dubbed the “Tech Prosperity Deal”, signed between the UK government and several US tech giants as part of Donald Trump’s second state visit to the UK.

The deal will see Google, Nvidia and others invest in British-based infrastructure to support AI tech, largely in the form of data centres. Microsoft will also now be involved in the creation of a powerful new supercomputer in Essex.

Microsoft CEO Satya Nadella told the BBC of the tech’s potential impact on economic growth.

“It may happen faster, so our hope is not 10 years but maybe five,” he said.

“Whenever anyone gets excited about AI, I want to see it ultimately in the economic growth and the GDP growth.”

Prime Minister Sir Keir Starmer said the US-UK deal marked “a generational step change in our relationship with the US”.

He added that the agreement was “creating highly skilled jobs, putting more money in people’s pockets and ensuring this partnership benefits every corner of the United Kingdom”.

The UK economy has remained stubbornly sluggish in recent months.

Mr Nadella compared the economic benefits of the meteoric rise of AI with the impact of the personal computer when it became common in the workplace, about ten years after it first started scaling in the 1990s.

But there are also growing mutterings that AI is a very lucrative bubble that is about to burst.

Mr Nadella conceded that “all tech things are about booms and busts and bubbles” and warned that AI should not be over-hyped or under-hyped but also said the newborn tech would still bring about new products, new systems and new infrastructure.

He acknowledged that its energy consumption remains “very high” but argued that its potential benefits, especially in the fields of healthcare, public services, and business productivity, were worthwhile. He added that investing in data centres was “effectively” also investing in modernising the power grid but did not say that money would be shared directly with the UK’s power supplier, the National Grid.

The campaign group Foxglove has warned that the UK could end up “footing the bill for the colossal amounts of power the giants need”.

The supercomputer, to be built in Loughton, Essex, was already announced by the government in January, but Microsoft has now come on board to the project.

Mr Nadella revealed the investment as Donald Trump has arrived in the UK on a three-day state visit.

The UK and US have signed a “Tech Prosperity Deal” as part of the visit, with an aim of strengthening ties on AI, quantum computing and nuclear power.

Technology Secretary Liz Kendall told the BBC the deal did not include guarantees over scrapping a tax for big tech or on copyright for AI companies.

The Digital Services Tax – a 2% levy which raises about £800m a year mainly from US tech companies – was previously said to be part of trade discussions.

But Ms Kendall told the Today programme “that wasn’t part of the partnership” now agreed.

She also said no guarantees were made to AI companies on copyright, a major issue for the UK’s creative sector – which has expressed concerns its work is being used by AI companies without permission.

“This is an issue that’s really important, we’re working on it at the moment,” she told Nick Robinson, adding: “We have to find a solution.”

Meanwhile, a number of tech companies have pledged billions of pounds in investment alongside Microsoft.

Google has promised £5bn for AI research and infrastructure over the next two years.

Nvidia also pledged to develop AI in the UK, which will help fuel innovation, economic growth and jobs, a spokesperson for the chip giant told the BBC.

The company said that along with its partners it will invest up to £11bn in the UK, in what it called the largest AI infrastructure rollout in the country’s history.

There are some concerns that accepting so much money from US investors will mean the UK relies too much on foreign technology.

In July, the White House made clear it wanted to “export American AI to allies and partners”.

Mr Nadella said he thought the UK-US agreement defined “the next phase of globalisation” and argued that having access to foreign tech services leveraged digital sovereignty rather than threatened it.

On the growing issue of AI taking over jobs, Nadella said Microsoft also had to “change with the changes in technology”, having laid off thousands of staff this year despite record sales and profits. He described it as “the hard process of renewal”.

The government also said there was “potential for more than 5,000 jobs and billions in private investment” in north-east England, which has been designated as a new “AI growth zone“.

Last year, the government announced a £10bn investment into a data centre to be built near Blyth, Northumberland.

It has now announced another data centre project in Northumberland dubbed Stargate UK from OpenAI, chipmaker Nvidia, semiconductor company Arm and Nscale.

OpenAI boss Sam Altman said Stargate UK would “help accelerate scientific breakthroughs, improve productivity, and drive economic growth”.

However the UK version is a fraction of the firm’s US-based Stargate project, which OpenAI launched in January with a commitment to invest $500bn (£367bn) over the next four years building new AI infrastructure for itself.

So far, reaction to the agreement has been broadly positive, but it is clear that there are many challenges ahead for the UK if it is to fulfil its intended potential.

The Tony Blair Institute described the news as a “breakthrough moment” but added Britain had some work to do.

Dr Keegan McBride, the Tony Blair Institute for Global Change’s emerging tech and geopolitics expert, said that work included “reforming planning rules, accelerating the delivery of clean energy projects, and building the necessary digital infrastructure” for growth.

Matthew Sinclair, UK director of the Computer & Communications Industry Association, hailed the agreement as “a powerful demonstration of the scale of the AI opportunity for the UK economy”.

But the Conservative Party highlighted that other big international companies such as the pharmaceutical giant Merck have recently cancelled or delayed their UK expansion plans.

Satya Nadella spoke to BBC News shortly before jumping on a flight to join Donald Trump as he arrives in the UK on a three-day state visit. Mr Nadella will be among other tech leaders, including OpenAI’s Sam Altman and Nvidia’s Jensen Huang, attending the Royal state banquet on Wednesday.

He said he would use Microsoft’s AI tool Copilot to help him decide what to wear.

“I was very surprised that there was a very different dress protocol, which I’m really not sure that I’m ready for,” he said.

Additional reporting by Imran Rahman-Jones and Philippa Wain.