Government to buy AI chips to stop tech companies fleeing Britain

Officials have been consulting with tech bosses on the plans in recent weeks. Draft outlines of the proposals, seen by The Telegraph, say it will involve “using public sector demand and strategic purchasing to deploy UK-designed AI hardware”.

It also involves ensuring companies have access to funding – including from the taxpayer – and investing in skills so that the businesses can keep their workforces in Britain.

“They are terrified about us leaving,” said a source at one AI company. Another said that the plan was not about “throwing endless amounts of cash” at companies but rather “about how can we be creative and strategic to play a leading position”.

Equipment bought by the Government could be used to run public services or be used to create AI clusters – supercomputing infrastructure that could then be provided to British companies or researchers.

Britain has invested hundreds of millions of pounds to build the AI research resource, which gives start-ups free access to powerful computers. However, to date it has largely been built using American chips from Nvidia and Intel.

The Government has said it will spend more than £1bn to expand the AI research resource 20-fold.

Industry briefings describe the hardware plan as being designed to “secure Britain’s future capability in chips and the semiconductor technologies that underpin AI”.

In addition to the central processors that power AI, the spending plan is designed to cover networking equipment increasingly critical to making AI work efficiently, as well as sensors and power systems.

Britain has had a string of successful microchip businesses that have been sold to foreign buyers such as Alphawave, Imagination Technologies and Graphcore. Arm, its most successful semiconductor business, is now listed in the US.

Promising new AI-focused semiconductor companies have emerged in recent years such as Fractile, Olix and Lumai, seeking to challenge Nvidia, whose processors dominate the AI industry and have been used as a trade weapon by the Trump administration.

In a recent speech, Ms Kendall warned that “the geopolitical settlement of the last 40 years has ruptured” and that “AI is not the engine of economic power and hard power”.

She said the Government wanted to secure “greater leverage” over key parts of the industry.

Ministers have already used a £500m AI fund to invest in infrastructure start-up Callosum while the Government’s advanced research agency, Aria, is running a £100m programme to dramatically cut the cost of AI computing.

On Thursday, semiconductor companies linked to the AI boom suffered a major sell-off after tech company Broadcom issued disappointing quarterly results.

Anthropic, one of the world’s most valuable companies, also called for governments to hash out plans for a pause in AI research to stop the technology getting out of control.

The Department for Science, Innovation and Technology did not comment.