UK Budget puts £600m into AI security and opens new opportunities for domestic technology firms

The UK government has announced a package worth more than £600 million covering AI security, biosecurity, cyber defence, domestic AI capability and technology innovation.

Announced by Chancellor John Healey ahead of this week’s Budget, the package includes new funding for AI-powered cyber protection, advanced semiconductor design, biosecurity and British technology firms.

It also provides support for companies developing robotics, autonomous systems and industrial AI.

The measures could open new opportunities for UK start-ups and smaller technology suppliers seeking government contracts, particularly in cyber security and AI assurance, where demand is expected to grow as organisations seek protection against increasingly sophisticated threats.

Healey said, “AI will transform daily life: every firm, community, hospital, school, and every aspect of our economy can benefit.

“I understand and share the concerns of working people, so I am setting out a distinctively British approach to AI – one that doesn’t leave workers behind and defends our national interest, while ensuring the benefits of AI-enabled growth are felt right across the country.”

The British Chambers of Commerce welcomed the announcement but warned that many innovative UK companies still face difficulties expanding their businesses and adopting AI.

“This is a strong package of measures to support the UK’s AI resilience and spread its benefits more widely in every postcode,” said Kate Shoesmith, the organisation’s Director of Policy.

“We are already home to some of the most innovative businesses in the world for developing AI models, but they face barriers to scale.”

New opportunities for UK cyber security firms

One of the most significant measures for the domestic technology sector is a £60 million National Cyber Shield programme, designed to strengthen the country’s defences against cyber attacks.

It includes a £25 million challenge fund specifically intended to support UK AI and cyber security innovators.

The government also plans to explore a regulatory sandbox that would allow new AI-powered cyber security technologies to be tested and deployed in critical national infrastructure, public services and industry.

The programme will use agentic AI, a technology that can carry out tasks and respond to problems with a degree of autonomy. In cyber security, such systems could help identify suspicious activity, investigate threats and support faster responses to attacks.

A separate £70 million National Exposure and Real-Time Vulnerability Centre will use AI to identify weaknesses in computer systems across critical infrastructure and the wider economy.

These investments could provide opportunities for UK companies specialising in threat detection, vulnerability assessment, software testing and automated cyber defence.

The government is also allocating another £120 million to the AI Security Institute, which looks into advanced AI systems, studies emerging risks and develops technical standards.

Security Minister Dan Jarvis said the investment would help the UK strengthen its defences while keeping pace with new threats.

“Today’s investment will help the UK seize the opportunities AI presents to strengthen our national security, while staying one step ahead of those who seek to use AI to do us harm.”

Ciaran Martin, former chief executive of the National Cyber Security Centre, welcomed the measures.

“This is a really welcome package at a critical time for our cyber defences. This week we’ve had a stark reminder that AI exposes some of our digital world’s weaknesses and brings new ways of exploiting them to those who’d do us harm.”

“So we need to padlock our systems, and harness AI for defence,” he added.

Backing British companies and advanced technologies

Beyond cyber security, the government is putting additional money into helping UK companies develop their own AI technologies rather than relying entirely on overseas suppliers.

An extra £60 million will go into the Sovereign AI Fund, which invests directly in promising British AI businesses.

Its remit will expand to include physical and industrial AI, covering robotics, autonomous systems and advanced manufacturing.

These are areas with potential applications across defence, aerospace, engineering and other industries.

Another £60 million will support the Sovereign AI Research and Development Procurement Scheme. This will focus on developing solutions for health and care, AI security, assurance and safe adoption.

For smaller technology companies, the procurement scheme could be particularly important. Developing a promising product is one challenge; securing customers willing to test and purchase it is another.

Government-backed research contracts could give such firms an opportunity to demonstrate their technologies and build a commercial track record.

The announcement does not, however, specify which companies will receive funding or when individual procurement opportunities will become available.

AI Minister Kanishka Narayan said the government wanted to strengthen the country’s ability to develop technologies essential to its security.

“We cannot afford to rely entirely on technology built overseas. By backing British science, advanced chips and our own AI companies, we can strengthen our national security, rebuild Britain’s industrial strength and create good, skilled jobs across the country.”

Julian David, chief executive of techUK, said the package addressed several priorities for the technology industry.

“This funding plays to the UK’s strengths in building, adopting and securing AI, and helps British AI firms grow here, not abroad, which is a vital step to build our sovereign AI capability.”

Edinburgh chip academy and Manchester cyber centre

The government is also investing £18 million in a UK Advanced Chip Design Academy, with new chip design capabilities planned in Edinburgh.

The academy will help develop specialist semiconductor skills and strengthen links between UK research institutions and advanced manufacturing.

Semiconductors are essential to AI computing, telecommunications, defence electronics and many other technologies. Developing domestic expertise in chip design could help UK companies retain more of the value generated by their research.

Manchester will host a new National Cyber Security Centre AI Cyber Security Centre of Excellence, which will train government specialists in cyber security and AI.

The investments are intended to expand the country’s technical workforce while developing capabilities outside London.

Shoesmith said the British Chambers of Commerce supported both the additional funding for domestic AI companies and the investment in semiconductor skills. “More funding for the Sovereign AI Fund should strengthen the cohorts of the UK’s home-grown talent, while a new UK Advanced Chip Design Academy is a step towards bolstering capability and resilience.”

AI biosecurity lab to tackle emerging threats

Another major element is a £165 million National AI Biosecurity Initiative.

Of this, £100 million will establish an AI Biosecurity Lab to improve the detection and monitoring of biological threats. The remaining £65 million will support biological surveillance and the development of medical countermeasures against priority pathogens.

The lab will also receive support through up to £200 million in AI model credits from OpenAI and Anthropic, alongside partnerships with Google DeepMind and London-based Basecamp Research.

These model credits are separate from the government’s direct financial investment.

Narayan said the new institution would help the UK respond to biological threats while developing its domestic scientific capabilities.

“Our new AI Biosecurity Lab will be a major new global institution, bringing together world-leading scientific expertise to protect people from emerging biological threats and ensure Britain leads the world in AI safety and security.”

The programme could create opportunities for UK companies working in biological data analysis, AI-assisted research, laboratory technologies and specialist software.

Aurelia Nguyen, Deputy CEO of the Coalition for Epidemic Preparedness Innovations, cautioned that AI also brings new biological risks.

“Rapid advances in AI are creating new risks related to the design and modification of pathogens, increasing the potential for both accidental and deliberate harm.”

She added that the same technology, if used safely, could help researchers identify threats earlier and develop vaccines more quickly.

Industry calls for wider AI adoption

The government is allocating £30 million to local AI partnerships involving mayoral authorities, councils, businesses, universities and colleges.

These partnerships are intended to help smaller firms adopt AI and develop the skills needed to use it.

A further £15 million AI Challenge Prize will initially focus on solutions to health problems.

The government has also committed £10 million annually to studying how AI will affect employment and industry, with another £23 million over three years for the AI Economics Institute.

The British Chambers of Commerce said further action would be necessary to ensure businesses of different sizes and sectors could benefit.

“Our research shows adoption is growing rapidly among firms, but it is at varying degrees and sectoral differences remain. Government should now look to address barriers to AI adoption to unlock growth across all firms,” Shoesmith said.