The U.S. and UK will broker a tech deal. Here’s what to watch.

Summary

POLITICO Tech Podcast Summary Episode: The U.S. and UK will broker a tech deal. Here’s what to watch.
Release Date: February 28, 2025
Host: Stephen Overlee

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Introduction

In this episode of POLITICO Tech, host Stephen Overlee delves into the pivotal meeting between U.S. President Donald Trump and UK Prime Minister Keir Starmer. While the ongoing war in Ukraine was expected to dominate discussions, the UK presented significant tech ambitions aimed at forging a new economic partnership centered on advanced technologies. POLITICO's Deputy Tech and Trade Editor in London, Joseph Bambridge, joins the conversation to unpack the complexities and potential implications of this emerging tech deal.

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Meeting Highlights: Balancing Conflict and Collaboration

Stephen Overlee opens the discussion by setting the scene for the Thursday meeting between Trump and Starmer. Despite the overshadowing conflict in Ukraine, the UK Prime Minister emphasized technological collaboration:

Keir Starmer (00:57): "Instead of overregulating these new technologies, we're seizing the opportunities that they offer. So we've decided today to go further, to begin work on a new economic deal with advanced technology at its core."

Starmer reiterated the historical collaboration between the U.S. and the UK in shaping technological innovations and expressed optimism for their partnership in leading 21st-century advancements:

Keir Starmer (01:31): "Look, our two nations together shaped the great technological innovations of the last century. We have a chance now to do the same for the 21st century."

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Proposed Tech Deal: Ambitions and Objectives

Joseph Bambridge provides an in-depth analysis of the UK's tech priorities heading into the meeting:

Joseph Bambridge (02:20): "The UK wants to partner with US tech firms for large scale compute investments... making the UK kind of the first overseas destination for US tech firms looking to build and partner."

The proposed economic arrangement seeks to position the UK as a premier destination for American tech investments, particularly in sectors like artificial intelligence (AI), quantum computing, and life sciences. This strategy aligns with the UK's recent initiatives to bolster its own tech infrastructure and innovation capabilities.

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UK’s Long-Term Tech Ambitions

Bambridge highlights the UK's strategic plans to become a leader in AI and related technologies:

Joseph Bambridge (04:28): "The UK came out with its AI Opportunities Action Plan, which was a kind of 50-point plan to make the UK an AI leader... building up the UK's sovereign capacity."

The plan emphasizes enhancing the UK's computational infrastructure and fostering an environment where the nation becomes an AI creator rather than merely a consumer, relying heavily on partnerships with U.S. tech giants to secure substantial investments.

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Navigating Cooperation and Competition

The delicate balance between collaboration and competition surfaces as Bambridge discusses potential tensions:

Joseph Bambridge (06:03): "Trump wants investment in the U.S., trying to build out AI infrastructure... while the UK aims to attract its own investments."

While the UK seeks to attract U.S. investments to expand its tech sector, Trump's administration focuses on reshoring technological investments within the United States. However, Bambridge notes that the scale of investment sought by the UK is significantly smaller, potentially mitigating direct competition:

Joseph Bambridge (06:42): "The UK will never kind of be on the scale that the US will be aiming for... but there are plenty of other pitfalls, particularly around regulation and taxes."

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Regulatory Challenges and Digital Services Tax

A significant hurdle in the negotiations revolves around digital regulations and the UK's Digital Services Tax (DST):

Joseph Bambridge (08:02): "The UK's Online Safety Act, its digital markets regime, its digital services taxes... these are areas that, you know, if they took Trump's attention, he probably wouldn't like."

The DST, which imposes taxes on global tech companies, is a contentious issue. Reflecting on the negotiations, Bambridge anticipates that the UK might consider reducing or withdrawing its DST to facilitate better terms with the U.S.:

Joseph Bambridge (10:44): "The UK might think it can give some ground... if OpenAI commits to invest £1 billion in the UK, you might take that trade-off."

However, this move carries political risks, including potential backlash from European allies who may view the UK as the first to capitulate under U.S. pressure.

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Elon Musk’s Influence: A Complicating Factor

Elon Musk emerges as a significant, albeit challenging, influence on the UK's tech landscape and its negotiations with the U.S.:

Joseph Bambridge (12:48): "Elon Musk is a complicating figure... he can throw the government's media plan off track, as we saw when he helped promote a child grooming scandal."

Musk's outspoken nature and substantial influence on social media platforms like X (formerly Twitter) can derail the UK's strategic messaging and focus, posing additional challenges for Prime Minister Starmer in maintaining a coherent negotiation strategy.

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Future Outlook: Assessing the Deal’s Substance

As the episode concludes, Bambridge reflects on the tangible outcomes of the meeting and what to monitor moving forward:

Joseph Bambridge (15:02): "The big question is how much of substance there is and whether this is actually just a strategy to demonstrate to Trump that the UK wants to be a partner... Whether a new agreement really moves the dial on investment, I think is an open question."

Key areas to watch include the future of Ukraine, potential U.S. tariffs on global tech, and early indicators of whether the U.S. and UK can establish a productive and mutually beneficial tech partnership.

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Conclusion

This episode of POLITICO Tech provides a comprehensive overview of the evolving U.S.-UK tech relationship amidst geopolitical tensions and shifting regulatory landscapes. With strategic ambitions on both sides, the coming months will be critical in determining whether this nascent tech deal will foster significant advancements or falter under competing national interests and influential external pressures.

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For more insights and updates on technology's impact on politics and policy, subscribe to POLITICO Tech and explore our newsletters, Digital Future Daily and Morning Tech.

Transcript

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[Stephen Overlee]

Hey, welcome back to POLITICO Tech. Today's Friday, February 28th. I'm Stephen Overleaf. The war in Ukraine was always going to dominate Thursday's meeting between President Donald Trump and UK Prime Minister Keir Starmer. But the Brits came to Washington with tech ambitions as well. Here's Starmer speaking at the White House on Thursday.

[Keir Starmer]

Instead of overregulating these new technologies, we're seizing the opportunities that they offer. So we've decided today to go further, to begin work on a new economic deal with advanced technology at its core.

[Stephen Overlee]

The details of this new economic arrangement will need to be fleshed out, though. Trump told reporters it could come together quickly. And for the UK the promise of a new trade deal marks a positive start to Trump's second term, especially compared to its European neighbors.

[Joseph Bambridge]

Here's Starmer again.

[Keir Starmer]

Look, our two nations together shaped the great technological innovations of the last century. We have a chance now to do the same for the 21st century.

[Stephen Overlee]

Joseph Bambridge is POLITICO's Deputy Tech and trade editor in London. And he tells me there are trade and technology tensions that could complicate these negotiations. On the show today, Joseph explains what.

[Joseph Bambridge]

The UK wants out of this deal.

[Stephen Overlee]

And what to watch for next. Here's our conversation.

[Joseph Bambridge]

Joseph, welcome to POLITICO Tech.

Thanks very much. Thanks for having me.

Of course. So the prime minister is in Washington. Tell me, what were Downing Street's tech priorities going into this meeting with President Trump?

So it's a great question, Stephen. Obviously, in the buildup, just to kind of put this in context, everyone thought the number one priority going into this meeting would be Ukraine, obviously, and conveying the UK's priorities there. But in the last few days, number 10 has really been keen to push this idea that they're also going to promote this idea of a new economic partnership with the US heavily focused on critical technologies like AI quantum and life sciences as well. This has all kind of escalated quite quickly in the last few days. Months back when there were rumors of Peter Mandelson being named the UK's ambassador to the US, he initially floated this idea of what he called a trade agreement between the UK and the US based on clicks and portals rather than bricks and mortars, which is a bit of an awkward, not quite rhyme, but I think the idea there was some kind of modern digital first trade agreement. And Peter Mandelson is kind of one of these labor grandees, similarly to Tony Blair in a way, who's gotten very into tech in the last few years. But in the last few days it's kind of emerged that what they're talking about here seems to be more around deep tech and really cutting edge innovation and collaborating on things like AI. And for example, making the uk, you know, the US tech firm's number one kind of overseas destination, so making it kind of their first port of call, the first place they think of to invest and partner overseas.

I was going to ask you what the UK wants to get out of this long term, because we've covered on the podcast for over a year now, kind of this evolution in the US UK tech relationship, first under Biden, around AI safety and now as they approach the Trump administration. What do you see as sort of the UK's longer term ambitions here?

Yeah, so I think there's a few things. First thing I'd point to is a few months back the UK came out with its, what it called it, its AI Opportunities Action Plan, which was a kind of 50 point plan to make the UK an AI leader. And there were a lot of commitments in there around boosting the UK's compute infrastructure and this idea of making the UK an AI maker rather than an AI taker. So this kind of idea of building up the UK's sovereign capacity, but that's obviously reliant on a lot of investment and at the time there was kind of no numbers attached to this plan. So I think one of the objectives which seems to be emerging is for the UK to kind of partner with US tech firms for large scale compute investments that we've seen with Stargate, perhaps not quite on the same scale, but I think the UK kind of wants to be seen as an attractive investment destination for American tech firms looking to build out their compute. So I think that's one thing related to that is the idea that the UK is a place with strong R and D, really strong academia, strong innovation record, and I think it wants to be seen almost as a partner to the US in kind of critical and deep tech where it can offer its expertise and academic skills. And the US kind of brings the capital and investment to the relationship. I think that's a kind of strategic play as well there.

Well, what's so interesting about that? I mean, I often think, especially around AI, but tech in general, it's a fine line between cooperation and competition between countries. And one thing we know about Trump is that he wants investment in the U.S. he's trying to build out AI infrastructure in the U.S. we've seen, you know, a lot of companies cozy up to him by promising big investments in the US Is that a potential tension point here of sort of the UK trying to lure its own investments at the same time that Trump wants everybody to be building and building and building in the US Somewhat?

I think there is plenty of tensions involved in this deal. I would say maybe less so on this front in terms of Trump's ambition to reshore manufacturing and attract investment in the US in data centers and the like. Only because the UK is, you know, it's a fairly small island. As I said, it does want to increase its compute capacity and, and attract investment in infrastructure, but it will never kind of be on the scale that the US Will be aiming for. But there are plenty of other pitfalls that could yet throw this partnership, this idea off course, particularly when we kind of talk about regulation and taxes.

Well, let's get into some of those tension points, because we've heard a lot from the Trump administration about tech regulation overseas, mostly aimed at the eu, but some at the UK as well. You, you know, one recent development, the UK renamed its AI Safety Institute. And some folks sort of viewed this as a response to the Trump administration really abandoning the safety focus that Biden had in place and focusing instead on sort of building AI as fast as possible. How are officials over there kind of navigating that change around artificial intelligence and the way that the US Is approaching this policy area?

Yeah, so I think that was a really significant moment when our Technology Secretary, Peter Kyle, announced at the Munich Security Conference that the AI Safety Institute in the UK which was the first AI Safety Institute created in the government in the world, would become the AI Security Institute. And in that announcement, he really notably kind of echoed some of the talking points that we've seen from people like Vice President J.D. vance and other officials close to the Trump administration use. For example, he said researchers in the AI Security Institute are not politicians, they're scientists. So he said their role was not to weigh in on issues like bias and discrimination, but but was to keep the British public safe from criminals and hostile states. And I thought that was quite a kind of telling moment, especially coming from a kind of Labour minister to kind of use language that, you know, would really be at home in, you know, the Republican National Convention or, you know, in Republican circles, I thought was, was quite significant. A question that you might ask is whether that move around the AI Security Institute is potentially aimed at partially deflecting from some of the other things that the UK is doing in this, in the kind of digital space. You mentioned that the EU has attracted a lot of the ire from President Trump and JD Vance and others. The UK's digital regulations aren't that different. There are a lot of areas. For example, with the UK's Online Safety act, with its digital markets regime that came into force in January, its digital services taxes, there are areas that, you know, if they took Trump's attention, he probably wouldn't like. There's potentially a bit of kind of distraction going on there as well.

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[Joseph Bambridge]

Edu that's so interesting to me. And you mentioned digital services taxes, which is a long standing issue that President Biden sort of negotiated away for a couple of years that now the UK and some other countries are bringing back. This is obviously something the tech industry hates. You know, they don't want to be taxed all around the world. What kind of fight are you expecting on that front? Because I can tell you that a lot of the American tech companies want the Trump administration to help fight their battles overseas.

Yeah, I mean, on the digital services tax specifically, I actually think it's an area where the UK might think it can give some ground. I mean, if you, if you look purely at the numbers, the tax raised just over £600 million last year, which is obviously a big number. But if, you know, you think you might get to a place where, for example, OpenAI is going to commit to invest £1 billion in the UK, you might take that trade off. I think the bigger question is obviously how this plays out politically. I mean, if the UK is seen as the first country to withdraw its digital services tax under pressure from Trump, and under this desire to get a deal, other countries might very quickly kind of fall to the same pressure. And so there's a bit of risk of being seen as, you know, the first domino to kind of fall and set this off. And there'll definitely be pressure from European countries to kind of put up a united front.

I'm curious as well, and this is the question we always have to ask, which is for the UK government, how complicating of a figure is Elon Musk? Because he's clearly had a lot of harsh criticism for Starmer and for the UK government in general. And he's also very influential in Washington, both with the White House and with Congress as well. How difficult does he make things for the uk as you say?

He's definitely a complicating figure. I thought it was interesting that Keir Starmer, when he got off the plane in Washington this week, attended an event at the US Embassy and in his opening remarks made a kind of joke that actually him and Kieran Elon Musk aren't all too different given, you know, that they've had very, very inflammatory run ins over the last few months. I thought it was interesting to, to kind of see Keir Starmer make, try to kind of make light of the situation. I think the idea there was, he was saying that, you know, if you, if you actually look at what he's doing in the uk, Keir Starmer is, has talked about reducing red tape, breaking down regulatory barriers. That being said, I think you can't downplay just how influential Elon Musk is in terms of bringing things to the surface that the UK government doesn't necessarily want to talk about. Just given his platform and particularly his audience in the UK among supporters of the Reform Party and even supporters of the Conservative Party in opposition, he really can just completely throw the government's media plan off track, as we saw when he really helped promote a child grooming scandal, which, you know, was a terrible scandal, but really has been kind of bubbling along for years. But Elon Musk, with his platform on X and his, his power to kind of shape conversations there, just brought it to the fore and it dominated conversation for days and there was nothing else the government could talk about. So I think, I think that's, you know, that's always a risk.

Last question for you here, Joseph. You know, coming off of the meeting with Trump and Starmer, there are a lot of issues that are unresolved. You know, obviously the future of Ukraine is a big one. There's this looming Threat of tariffs from Trump on countries all around the world. What are you watching for most in sort of the tech relationship here? And will there be early road signs of whether these two governments can find a way forward on tech that is actually productive?

Yeah, well, exactly. I think the big question here is how much of substance there is and whether this is actually just a strategy to show and demonstrate to Trump that the UK wants to be a partner and kind of hope that that helps you get a better deal on trade as well. You know, you could argue that the UK and the US as, as you know, British politicians love to highlight, already have arguably the closest relationship that two countries can possibly have when it comes to defense and intelligence sharing. Very close economic ties. They share the same language, they have cultural links. You have existing agreements in tech, specifically, you have existing agreements like Aukis that arguably already exist to facilitate this type of collaboration and partnership in cutting edge technologies. So whether a new agreement really moves the dial on investment, I think is an open question. I think what the UK government will be hoping is that it demonstrates when Trump talks about making American AI the global standard, for example, the UK is in his camp rather than a competitor.

Well, we will see how this all plays out. But Joseph, thanks for joining us on Politico Tech.

My pleasure.

[Stephen Overlee]

That's all for today's Politico Tech. If you enjoy Politico Tech, please subscribe and recommend it to a friend or colleague. And for more tech news, subscribe to our newsletters, Digital Future Daily and Morning Tech. Music in our show comes from the mysterious brake Master Cylinder. Our managing producer is Annie Reiss. Our editors are Steve Heuser, Daniela Cheslo and Louisa Savage. I'm Stephen Overlee. See you back here tomorrow.