US Halts £31 Billion UK Tech Deal Amid Escalating Trade Disputes

US Freezes £31 Billion UK Tech Prosperity Deal

The United States has officially paused the implementation of its £31 billion 'Tech Prosperity Deal' with the United Kingdom, a significant agreement aimed at fostering technological collaboration and investment. The decision, first reported by the New York Times and subsequently confirmed by British officials, marks a considerable setback for the UK's ambitions in the technology sector and its economic ties with Washington.

The deal, valued at approximately $41.6 billion, was initially unveiled in September during US President Donald Trump's state visit to the UK. At the time, UK Prime Minister Keir Starmer lauded the agreement as 'a generational stepchange in our relationship with the US'.

Core Investments and Objectives

The 'Tech Prosperity Deal' was designed to deepen cooperation between the two nations in critical areas such as artificial intelligence, quantum computing, and civil nuclear energy. A central component of the agreement included substantial investment pledges from major US tech companies, with Microsoft committing £22 billion and Google pledging £5 billion.

Furthermore, the deal envisioned the creation of an artificial intelligence 'growth zone' in the north-east of England, which UK officials projected could attract up to £30 billion in investment and generate 5,000 jobs.

Unresolved Trade Barriers Cited by US

Washington's decision to put the deal on hold is attributed to a lack of progress from the UK in addressing broader trade barriers. Key points of contention include:

• Digital Services Tax (DST): The US has expressed frustration over the UK's 2% levy on the revenues of large tech companies, including American firms like Amazon, Google, and Apple. This tax generates approximately £800 million annually for the UK.
• Food Safety Rules: Disagreements persist regarding the UK's food safety regulations, which prohibit the import of certain US agricultural products, such as chlorine-washed chicken and hormone-treated beef.
• Online Safety Rules: The US has also reportedly voiced concerns over the UK's online safety regulations, which impose increased responsibilities on large technology platforms.

The agreement itself contained a clause stating it would only 'become operative alongside substantive progress being made to formalise and implement' the broader Economic Prosperity Deal, providing the US with leverage to pause its execution.

UK's Response and Future Outlook

Despite the setback, UK officials have sought to downplay the development. A UK government spokesperson stated, 'Our special relationship with the US remains strong and the UK is firmly committed to ensuring the Tech Prosperity Deal delivers opportunity for hardworking people in both countries.' Prime Minister Starmer has reportedly resisted US pressure to alter the digital services tax and has maintained a commitment to not weaken farming standards.

The suspension highlights the complex interplay between technology cooperation and wider trade negotiations, raising questions about the future trajectory of US-UK relations and the UK's technology investment landscape.