UK plans to buy AI chips from British firms to stop them leaving for the US

The UK government will offer to buy AI chips directly from British technology companies in a bid to keep them in the country. Technology Secretary Liz Kendall will outline plans for “strategic purchases” of semiconductor equipment from UK-based firms at London Tech Week this week, the Telegraph reported. The initiative includes access to taxpayer-backed funding and investment in skills to retain workforces in Britain.

The announcement is part of a broader AI hardware plan that targets 5% of the global chip market, which would translate to roughly £37 billion in revenue and tens of thousands of jobs. The government has already committed £100 million through ARIA’s scaling compute programme, including £50 million for a scaling inference lab where British startups can test and demonstrate that their hardware works.

The urgency is clear. Britain keeps losing its best chip companies to foreign buyers. SoftBank acquired Graphcore in 2024. Qualcomm bought Alphawave IP for $2.4 billion last year. Arm, the UK’s most valuable chip designer, chose New York for its main listing in 2023. Each departure weakened the case that Britain can retain a semiconductor industry of its own.

“This is far too important a technology to depend entirely on other countries, especially in areas like defence, financial services and health care,” Kendall said in a speech at Bloomberg in January, when she announced £1 billion in funding to expand the UK’s AI research compute capacity by 20-fold.

The chip purchases would make the government a customer, not just a regulator, giving British firms guaranteed demand. Six UK companies have already gained access to government-funded supercomputers to advance their AI models, with the government retaining a right of first refusal for future investments. Fractile, a British inference chip startup that recently raised $220 million and is reportedly in talks with Anthropic, is among the firms the strategy aims to support.

The plans also respond to concerns about foreign dependency in government procurement. A recent parliamentary report warned that US firm Palantir should not play such a significant role in the UK public sector, and flagged a growing reliance on Microsoft and AWS. The HMRC’s £175 million AI contract with London-based Quantexa was an early signal of the government’s preference for domestic providers.

Whether strategic purchases alone can prevent the next Graphcore from being sold abroad remains an open question. Britain has the engineering talent and the research base. What it has lacked is the domestic demand and patient capital to keep companies scaling at home instead of selling to SoftBank or Qualcomm at the first serious offer.