Sir Keir Starmer’s goal to make the UK an AI superpower is at risk without urgent changes, a new report from industry warns today.
Attracting investment from tech giants to build the massive data centres needed to train the AI models at the heart of the current boom is a key plank of Labour’s growth plan.
And this week, bosses from some of the most influential companies in the sector – like Nvidia – are in the UK as Donald Trump visits.
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But the UK could lose out to rivals in the EU and the Nordic states if it does not change its approach to energy pricing and copyright law, the report says.
In the document, UK-based datacentre builder Kao says the UK risks becoming an “AI taker, not maker” – an inversion of the prime minister’s stated hope when the AI opportunities action plan was published earlier this year.
The government disputes the claims, and highlights that the UK is the “third-largest AI market in the world” which is “totally at odds” with Kao’s findings.
Google today announced a multi-billion pound investment in the UK and AI.
Those in industry say that not enough has been done since AI opportunities action plan was published at the start of 2025, and the nine months that have since passed is a long time in the context of the sector.
The report is calling for changes to give data centres access to cheaper energy, and a relaxing of copyright laws. Without solid commitments by the end of the year, they warn that investment will instead head overseas.
Kao has eight data centres either built or operating in the UK, and has invested more, including a £350m investment in Manchester.
Spencer Lamb, the managing director of Kao, said: “Unless fundamental issues around energy availability and pricing, AI copyright and funding AI developments are solved – and solved quickly – the UK will miss out on one of the most remarkable economic opportunities of our time, and ultimately risks becoming an international AI backwater.”
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June: Keir Starmer wants UK to embrace AI
Industry sources say that for the UK to be competitive in the sector, projects need to be started as soon as possible to allow for a full ramping up of operations by 2030.
For power, there have long been complaints in industry about the inability to access cheap energy provided by renewables. Restrictions from the UK’s creaking National Grid infrastructure have also raised significant concerns.
The report warns the UK has some of the “highest energy prices in the world”, and businesses are “spending 60% more per unit of electricity than many other European nations”.
This is down to the UK’s energy cost being tied to the cost of gas.
There is then the issue that because of the UK’s outdated grid, green energy companies are paid to turn off their wind turbines when too much power is being generated, and then the government pays for extra gas to be burned when the wind stops blowing.
This money comes out of user bills, and costs households an average of £45 per year, the Kao report states. They estimate it could be £145 by the end of the decade.
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The companies involved in data centre development want the ability to build near green energy hotspots like the North or Irish Sea coasts, and access the power directly without being subject to the whole grid.
They argue this will help with the development of the National Grid, as it will create the modern infrastructure needed for a greener system.
The report calls for a series of changes, including allowing data centres to get access to cheaper energy and for Ed Miliband’s Department for Energy Security and Net Zero to work in closer alignment with the Department for Science, Innovation and Technology, now headed by Liz Kendall.
Currently, the government’s AI energy council brings these two departments together, although there have been a limited number of meetings.
On copyright, the argument from the report is that the UK’s system is outdated and stymying development of the Large Language Models (LLMs) at the centre of the current AI boom.
These pieces of software – the backbone of AI like ChatGPT, Gemini or Claude – use vast swathes of existing human work to learn how the English language works, which allows them to interpret the meaning of text and then decide what word comes next in a sentence.
Sir Elton John opposed previous attempts to change copyright law. Pic: PA
However, the process of “scraping” information from published works without consent or remuneration has angered the creative sector.
The report calls the UK to harness the freedoms of Brexit to “lead on AI copyright law and provide a competitive solution” compared with the EU.
Currently in the UK, human creators have to opt in for their work to be eligible for AI training.
The EU, however, operates a system where works are automatically eligible for LLM training unless the artist wants to opt out.
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Previous attempts to change the law by the current government ran into sustained difficulties in the House of Lords, backed by Sir Elton John.
A goverment spokesperson said: “Since taking office more than £44bn has been injected into our AI sector and we have the third largest AI market in the world – totally at odds with these findings.
“Through our AI Opportunities Action Plan we’re building the infrastructure we need – from data centres to compute capacity so we can power AI. And we’re working with Ofgem and network companies to reform the outdated connections process so we speed up the delivery of new infrastructure.
“We remain committed to sensible and fair AI development. No decisions have yet been taken on AI copyright, however our focus is on both supporting rights holders and creators, while making sure AI models can be trained on high-quality material in the UK.”
