UK offers homegrown AI start-ups £100mn to improve public services

The UK government has launched a £100mn competition for domestic start-up AI companies to improve the delivery of health and other public services.

The scheme, announced by chancellor John Healey on Monday, comes amid mounting political opposition to the granting of government contracts to US software group Palantir.

Under the new Sovereign AI R&D Procurement Scheme, British start-ups will be able to propose projects on public sector priorities such as cutting NHS waiting lists to strengthening cyber security.

The winners will receive contracts ranging from £250,000 to £10mn per project, with most agreements expected to be about £1mn to £3mn.

Healey unveiled the contest at the G20 finance ministers meeting in North Carolina, where Bank of England governor Andrew Bailey warned of the risks that AI poses to cyber security and market stability.

Under the terms of the British initiative, start-ups will keep ownership of all their intellectual property created during the project. The government will get a licence to use the outputs, data and results to improve public services.

The funds will come from the £500mn Sovereign AI initiative, set up in April amid ministerial concerns about the country’s dependence on US tech companies.

The last Conservative government handed a huge £330mn seven-year NHS contract to Palantir, which has been criticised for its support of US President Donald Trump’s immigration agenda and its mixed results in the health service.

Healey said smaller companies were often locked out of public contracts because they lacked the turnover, cash reserves or record of larger groups.

The new scheme would remove those barriers by providing upfront payments where appropriate, he said.

It will focus on four areas: automating workflows, co-ordinating care and supporting decision-making in the NHS; expanding the UK’s public AI computer capacity; working with the Ministry of Defence to connect data and frontier AI capabilities in defence systems; and helping organisations mitigate risks associated with AI agents.

The focus will be on technology that has “moved beyond early research but needs the opportunity, funding and environment to prove what it can do”, the government said.

The Sovereign AI fund does not require start-ups to remain in Britain as they grow.

“Britain is home to some of the most innovative AI companies in the world, and this government is backing them to start, scale and succeed here in the UK,” Healey said.

He also confirmed that the UK will open up its AI Economics Institute — a new government research agency — to international co-operation with other G7 countries.