Microsoft says £22bn UK AI investment could boost GDP by 10% in five years

Microsoft announced a £22 billion ($30 billion) investment in the United Kingdom's artificial intelligence sector and said the influx of capital could increase British economic output by about 10% within five years. The investment, Microsoft said, forms a major part of a wider $31 billion package agreed between the UK government and several US technology companies to build AI-supporting infrastructure, largely through data centres.

Microsoft Chief Executive Satya Nadella told the BBC that the company’s commitment — its largest outside the United States — and the broader transatlantic agreement could accelerate productivity gains and create high-skilled jobs across the country. "It may happen faster, so our hope is not ten years but maybe five," he said, adding that advances in AI will drive "new products, new systems and new infrastructure." Prime Minister Keir Starmer described the deal as "a generational step change in our relationship with the US," saying it would "create highly skilled jobs, put more money in people's pockets and ensure this partnership benefits every corner of the United Kingdom."

The Microsoft package includes involvement in a government-announced supercomputer project in Loughton, Essex, and commitments to build and expand data centres that would underpin AI services. The investment accompanies pledges from other firms: Google has promised about £5 billion for AI research and infrastructure over two years, while projects involving chipmaker Nvidia, OpenAI, semiconductor firm Arm and infrastructure firm Nscale are planned for the north-east of England.

The government designated a north-east "AI growth zone" it said could generate more than 5,000 jobs and attract billions in private investment. OpenAI said its planned Stargate UK project at Cobalt Park in Northumberland would "help accelerate scientific breakthroughs, improve productivity, and drive economic growth," though the company’s UK plans are a small fraction of its larger U.S. Stargate commitment.

Chancellor Rachel Reeves opened a £735 million data centre in Hertfordshire on the same day the deals were announced, and ministers have already signed several contracts that tied U.K. public services to U.S. providers, including agreements to use OpenAI services in the public sector and a roughly £400 million contract with Google Cloud for the Ministry of Defence.

Industry and policy experts welcomed aspects of the package but cautioned that the UK must address practical challenges. The Tony Blair Institute called the moment a "breakthrough" while urging reforms to planning rules, faster delivery of clean energy projects and improved digital infrastructure to support the investments. The Computer & Communications Industry Association called the agreement "a powerful demonstration of the scale of the AI opportunity for the UK economy."

Environmental and sovereignty concerns were also raised. Campaign group Foxglove warned that the UK could end up "footing the bill for the colossal amounts of power the giants need." Nadella acknowledged AI’s current high energy demands and said investment in data centres effectively implied investment in modernising the power grid, though he did not say Microsoft would fund upgrades to the national transmission system. Critics have also warned that heavy reliance on foreign tech companies risks overdependence on overseas infrastructure.

Nadella sought to temper expectations about the speed and shape of the technology’s impact, noting that computing revolutions can take years to deliver broad gains and that tech cycles include "booms and busts and bubbles." He said companies must manage workforce changes responsibly, referring to recent Microsoft job reductions as part of "the hard process of renewal." Conservative politicians pointed to recent corporate withdrawals and delays, including moves by some multinational firms to scale back U.K. expansion plans, as a reminder that attracting sustained investment is not guaranteed.

The deals were announced as U.S. President Donald Trump undertook a three-day state visit to the U.K. and followed the signing of a "Tech Prosperity Deal" intended to deepen cooperation on AI, quantum computing and other advanced technologies. Nadella and other industry figures, including OpenAI chief Sam Altman and Nvidia’s Jensen Huang, were among the tech leaders invited to events linked to the visit.

Government officials and company executives said the projects would be rolled out in phases, beginning with data-centre construction and the establishment of specialised AI sites, followed by deployment of computing capacity for research, health services and business applications. Observers said the agreement’s ultimate impact will depend on regulatory clarity, local planning decisions, the pace of clean-energy rollout to meet increased power demand, and how effectively public and private sectors deploy the new infrastructure.

Microsoft’s £22 billion commitment marks one of the largest single private investments in the U.K. technology sector in recent years and crystallises a high-profile push by the government to position Britain as a hub for AI research and deployment. The coming months will test whether the infrastructure, policy changes and energy supply can keep pace with companies’ ambitions and convert investment pledges into sustained economic gains.