AI across the UK

Artificial intelligence is a booming industry within the UK. More than 5,800 companies are involved in the AI ecosystem, which has increased by 85% over the past two years. The AI sector of the UK economy was valued at $230 billion in the first quarter of 2025 making the UK the third largest AI market in the world, matched only by China and the United States, and the largest in Europe.The UK AI market is expected to exceed $1 trillion by 2035, by which point it is expected to have boosted UK GDP by over $500 billion.

The previous Conservative-led government committed the UK to becoming an ‘AI superpower’ and the Labour government elected in 2024 seems to share the same goals. In their election manifesto Labour committed themselves to keeping “the UK at the forefront of global innovation” including supporting “the development of the Artificial Intelligence (AI) sector”.

In 2021 the government published a National AI Strategy which laid out a ten-year plan of investment in artificial intelligence, along with plans for adoption and governance. In 2023, the UK hosted the first global AI Safety Summit at Bletchley Park, and established the AI Security Institute (AISI) to monitor frontier AI models. That same year the UK was ranked third in the Global AI Readiness Index, and the Conservative Government committed to funding £1 billion of investment into AI research. However, that funding was cut by the Labour Government when they came into power after the 2024 General Election. Despite this, AI start-ups in the UK raised over £1 billion in funding in the first quarter of 2025.

The newly elected Labour Government published in 2025 the AI Opportunities Action Plan which set goals to support infrastructure development and build domestic AI tools. It included a £2 billion investment in artificial intelligence and the designation of ‘AI Growth Zones’. Since 2025 there have been five areas designated as AI Growth Zones and £68 billion of investment pledged. In June 2026 the government announced a further investment of £60 million to set up two new research labs for AI in Oxford and University College London.

London, the South East, and the East of England accounted for around 75% of AI company locations in 2024, although there are signs that the number of AI firms in other UK regions is increasing.

Both Scotland and Northern Ireland have issued their own AI strategies. In Scotland, investment in AI grew 35% each year from 2020 to 2024, reaching £53 million in 2024. The tech sector of Scotland’s economy was worth nearly £7 billion in 2024 and is expected to grow 1.5 times faster than the overall economy over the coming years, and is anticipated to generate more than £23 billion in additional annual GDP by 2035. Nevertheless, less than a third of Scottish businesses currently use AI, with business leaders citing low confidence in the safety and effectiveness of the tools.

Some UK artificial intelligence businesses have raised concerns about dependence on foreign technology and infrastructure, particularly in cloud computing and large language models.

In April 2026 the government announced the Sovereign AI Fund, a £500 million investment in developing AI tools and systems built in the UK. The initiative recognises that the UK needs homegrown AI capabilities in order to not get left behind in the global AI race. Unlike many government units, Sovereign AI works more like a venture capital fund, investing directly in British tech startups.

Despite this investment there is some scepticism among some AI leaders about the ability of the UK to develop fully sovereign UK capabilities due to the high cost of such endeavours.

It has been estimated that 85% of the UK population is aware of ChatGPT or other AI models. More than half of adults in the UK say that they have used generative AI tools in the past 12 months, and around a quarter of people use them weekly at work.

Three-quarters of UK tech leaders say that artificial intelligence is boosting their companies’ growth and, according to research by Forbes in 2024, 79% of employees have used generative AI to help them at work. Around one in six UK companies are using at least one kind of artificial intelligence technology, rising to two out of three for large companies.

However, research by the government published in February 2026 showed that adoption of AI by UK business is still relatively low. One in six businesses currently use AI, but many have no plans to adopt the technology.

Research by Forbes found that 59% of people in the UK have concerns about the use of artificial intelligence. Some of those concerns focus on broad civilisational risks for the future, but AI presents significant immediate risks now.

AI chatbots like xAI’s Grok have made the headlines in recent months for the ability to generate non-consensual sexualised images of real people. In many cases these images of real people, so-called ‘deepfakes’, are difficult to distinguish from real pictures. In June 2026, Jess Asato, the MP for Lowestoft in Suffolk, sued xAI over claims that it was used to create non-consensual fake images of her in swimwear.

In January 2026, the Secretary of State for Science, Innovation and Technology, Liz Kendall, said to the House of Commons that “AI is a transformative technology which has the potential to bring about extraordinary and welcome change… But in order to seize these opportunities, people must feel confident that they and their children are safe online and that AI is not used for destructive and abusive ends… we will leave no stone unturned in our determination to stamp out these demeaning, degrading and illegal images.”

The Data (Use and Access) Act was passed in 2025 which amended the Sexual Offences Act 2003 (SOA 2003) to bring in new offences of creating, or requesting, intimate images of an adult without their consent. The Crime and Policing Act 2026 further amended SOA 2003 to outlaw the use of ‘nudification’ apps to generate non-consensual intimate images, as well as creating indecent images of children, and the supply of tools to create these kinds of images.

The Crime and Policing Act 2026 also amended the Online Safety Act 2023 to close loopholes concerning AI chatbots, ensuring that the Act covers “illegal AI-generated content” and “the use of AI services for the commission or facilitation of priority offences.” The Act also gave Ofcom regulatory powers over artificial intelligence services to enforce this legislation.

Business consultancy firm KPMG estimates that 2.5% of work tasks could be performed by artificial intelligence systems, which could add 1.2% to productivity in the UK. The UK government has predicted that around 7% of UK jobs could be displaced by AI over the next five years, which could rise to 18% over 10 years and nearly 30% over two decades.

A government report in January 2026 noted that frontier AI models are now able to produce “expert-quality work on a significant share of real-world professional tasks.” Around 70% of UK workers are in professions that could be enhanced by AI, or replaced by the technology. Hiring is falling faster in occupations that are more exposed to AI, but it is as yet unclear whether AI is the reason for this fall.

The UK doesn’t currently have any AI specific legislation or regulation. Instead, regulation of artificial intelligence is achieved through existing legal frameworks. In 2023 the Johnson and Sunak Conservative governments started to develop a regulatory framework for AI. Their white paper proposed that existing bodies, such as Ofcom, should continue to oversee the use of AI. This formed what they called a ‘pro-innovation approach to AI regulation’.

The current Labour government has continued to favour this approach. In their manifesto for the 2024 general election, Labour promised to introduce “binding regulation on the handful of companies developing the most powerful AI models”. However, any such legislation has yet to appear. In February 2025, the government said that “most AI systems should be regulated at the point of use” and that “existing expert regulators are best placed to do this”.

There are a number of areas where current legislation applies to artificial intelligence, such as:

• Data Protection: If personal data is used with AI systems, and automated decision-making, then it is covered by the UK’s GDPR rules and the Data Protection Act 2018. Recent reforms of data protection law has been seen as more ‘AI friendly’ and expands the ways decisions can be made on automating personal data.
• Financial Services: Use of AI in financial services is covered by existing financial services regulation and statutory law. Additional guidance is provided by the Financial Conduct Authority’s handbook and the Prudential Regulation Authority’s rulebook.
• Cybersecurity: Use of AI in IT systems needs to comply with the Network and Information Systems Regulation 2018, as well as any security laws relevant to particular sectors, such as the Communications Act 2003, and financial services rules for security.
• Employment: The Equality Act 2010 and Employment Rights Act 1996, along with the Health and Safety at Work Act 1974 all cover employment laws that apply to artificial intelligence, especially where those systems automate tasks or make decisions that affect employees.
• Medical devices: The use of AI in medical devices is regulated by the Medical Devices Regulations 2002. In Northern Ireland, EU Laws apply as a result of the Windsor Framework, and compliance with the EU AI Act will be required for the CE marking of AI-enabled devices in the UK.

The government’s AI strategy is mostly led by the Department for Science, Innovation & Technology (DSIT). The AI Security Institute (AISI) is a research organisation within DSIT that aims to understand the risks posed by artificial intelligence. DSIT also funds the AI Standards Hub which seeks to develop trustworthy and responsible AI systems.

The government’s AI Opportunities Action Plan laid out the need for ‘well-designed and implemented regulation’, saying: “Government must protect UK citizens from the most significant risks presented by AI and foster public trust in the technology, particularly considering the interests of marginalised groups. That said, we must do this without blocking the path towards AI’s transformative potential.” The plan highlights various steps to be taken including funding regulators to scale up their capacity, ensuring safe AI innovation via government departments, and implementing solutions such as regulatory ‘sandboxes’ where changes to regulations can be tested.

The government published their report into Copyright and Artificial Intelligence in March 2026. The report recognised the challenges posed by the advances in generative AI which have been trained on copyrighted works. However the report concluded that more time was needed, stating: “We will not introduce reforms to copyright law until we are confident that they will meet our objectives for the economy and UK citizens”.

Artificial intelligence is a rapidly changing field and it remains to be seen whether the UK’s laws and regulation is able to keep up with new developments. Legislation that is relevant today might soon be out of date tomorrow, as we have seen with amendments to the Online Safety Act. Keeping up with innovations in AI will be essential to advocate for the most vulnerable as progress marches ever onwards.