Reeves speaks up about UK sovereign AI

Chancellor Rachel Reeves used her Mansion House speech to talk about the UK’s AI strategy and sovereign AI capabilities. She described AI as “the defining technology of our generation”, adding that “it will be crucial to our national security and to all our economic futures”.

But, as Forrester’s Global sovereignty forecast notes (see ‘Sovereign strategy limitations’ box below), achieving absolute national sovereignty is expensive and complex. As an example, the report states that it is often unrealistic and unnecessary to develop sovereign AI frontier models. The analyst firm recommends that mid-size nations such as the UK should decide which nations to depend on for their AI capabilities, to what extent and on what terms.

As an example of tech innovation coming to the UK, Reeves said that US payment provider Mastercard has selected the UK as the first country in Europe to roll out its AI agent-based payment system for e-commerce called Agent Pay for Machines. The system works across the Mastercard payment network to enable machine-driven commerce, where software can make payment transactions without human intervention.

Reeves sees the role of the UK government as “active and strategic” by “embracing the opportunities of AI while guarding against the risks”, saying: “That means having a serious plan on AI sovereignty, backing UK companies to win at critical positions in the AI stack – through our Sovereign AI unit, through our advanced market commitment to quantum, through our AI hardware plan and through our new AI Economics Institute.”

Among the big challenges the UK faces as it builds out sovereign tech and AI capabilities is that datacentre running costs are extremely high compared to other geographies.

In 2025, think tank The Social Market Foundation reported that powering a 100 MW datacentre in the UK would cost around £226.5m per year, compared to France (annual costs of £156.3m), and Sweden (£67m). The report also found that annual electricity costs were almost four times higher in the UK than in the United States (£56.8m).

Although the UK government has recognised high energy prices, there are questions over whether its energy strategy will deliver real benefits in terms of lower bills in those organisations that are high energy users.

In April, Reeves announced the British Industrial Competitiveness Scheme (BICS) to reduce electricity costs in manufacturing, being expanded to support 10,0000 businesses. BICS exempts eligible businesses from the indirect costs of three electricity schemes: the Renewables Obligation, Feed-in Tariffs, and the Capacity Market, and is worth around £35-£40 per MWh.

According to the government, sectors that could benefit include automotive and aerospace, steel producers, metal fabricators, pharmaceutical and medical supplies companies, recycling businesses, plastic producers, nuclear fuel processors, and cooling and ventilation equipment manufacturer

However, the Datacentres: planning policy, sustainability, and resilience research brief for members of Parliament, points out that datacentres are not eligible for these schemes, despite being high energy users. 

At the time it was announced, UK technology trade association, TechUK, said BICS fails to account for several strategically important sectors hit hard by high energy bills, such as the digital infrastructure that underpins a modern economy.

“This cherry-picking approach will inevitably leave excluded sectors feeling abandoned, which is why urgent action is needed to reduce energy bills across the board through reform of non-commodity costs (such as levies to fund environmental and social schemes) instead of discounts being awarded to specific businesses,” said TechUK.