Chancellor Rachel Reeves delivered her first Spring Statement on Wednesday, setting out an economic plan that could have major implications for the UK’s tech sector as she pivots towards AI.
With billions in government cuts, a fresh push for AI-driven efficiencies, and no new tax hikes, the statement signalled a shift towards automation as a cost-cutting tool.
“It’s encouraging to see the government backing up its ambition to make the UK a future AI powerhouse with concrete action in this Budget”, said Andrew Insley, Advania UK’s chief financial officer.
“The targeted incentives and investment commitments for AI are exactly the kind of bold moves the industry has been calling for.”
More ‘cutting-edge’ tools for government
The government is bringing forward £3.25bn in investment for public services reform, announced the Chancellor.
Reeves described that under this investment, the first allocations will go towards AI-powered tools for civil service efficiency, and advanced technology to modernise probation services.
She also said it will go towards a digital transformation in HMRC, to crack down on tax avoidance.
“We are making our state leaner and more agile”, she announced. “This investment will deliver a further £3.5bn in day-to-day savings by 2029/30.”
Yet, sector experts have cautioned that legacy IT systems remain a major barrier to government adoption of AI.
Etay Maor, chief security strategist at Cato Networks, warned that “the UK government must tackle legacy IT issues head-on. Ignoring security risks and outdated infrastructure is a recipe for disaster.”
Defence tech
Following previous plans to increase defence spending to 2.5 per cent of GDP by 2027, Reeves announced £2.2bn for the ministry of defence to invest in AI, drones, and next-gen defence tech.
She also announced a £2bn investment in loans for overseas buyers of UK defence goods.
“We will be a defence industrial superpower”, Reeves declared, pledging to bring innovative technology to the frontline at speed.
However, members of the tech sector worry this focus on defence comes at the expense of other high-growth areas.
Benjamin Craig, associate director at Ayming UK, said: “The government has good reasons to increase defence spending, but this shouldn’t come at the expense of investment in clean energy and green tech – where the UK has world-class potential.”
AI and automation
Reeves announced the government’s plan to cut 10,000 civil service ‘back office’ jobs prior to her announcement, stating that AI and automation will help fill the gaps.
“As technology advances”, she said last Sunday, “our government must modernise too.”
Today, Reeves reiterated: “Our investment in pioneering AI tools will make public services more efficient, more productive, and more focused on the user.”
While this could unlock £2bn in savings, many in industry leaders have cautioned against framing AI as a job cutting tool, rather than an enabler of productivity and growth.
Adam Hadley, chief executive of QuantSpark, welcomed the move, but warned that implementing AI at scale requires more than just new technology.
He said: “For AI to deliver meaningful change, we must rethink entire organisational structures. This will require upfront investment, political commitment, and a clear strategy for integration.”
Despite Reeves’ pivot towards automation, Simon Tindal, chief tech officer of Smart Communications, argued that AI adoption in the UK is already lagging behind its global rivals.
“Without targeted incentives, which I had hoped to see in the Spring Statement, we risk creating a tech gap that UK businesses simply can’t afford”, he said.
“Billions in potential growth are at stake. If we don’t act now, we risk becoming an innovation backwater.”
Cybersecurity – a missed opportunity?
Fraud now accounts for nearly 40 per cent of UK crime.
Yet, despite causing great concern over AI-driven fraud, deepfakes and cybercrime, Reeves did not introduce any major new measures to combat these threats.
Marko Maras, chief executive of Trustfull, called this a major oversight.
“Criminals are already using AI to exploit gaps in regulation”, he said.
“Without stronger UK-EU collaboration, and tougher penalties for tech platforms that allow fraud to spread, we’re falling behind.”
Silviha Krupena, director at RedCompass Labs, added: “the government have missed an opportunity to hold big tech firms accountable for scams on their platforms.”
She urged for “AI-driven fraud detection tools and stricter regulations to combat this growing crisis.”
Where does the Spring Statement leave UK tech?
For the tech sector, Reeves’ spring statement raised as many questions as it answered.
While AI is being positioned as a cost-saving tactic, tech leaders warn that without the right policies and incentives, the UK will struggle to compete on the global stage.
From AI adoption, to automated services and technological growth, Wednesday’s post-match consensus is clear. The government needs to do more to support innovation – not just cut costs.