Britain funds it. Then what?

Welcome to the tenth edition of The Eye—our weekly guide to the shifting relationship between Big Tech and the state.

This week: New details of the government’s £100m gamble, the case for open source and our parliamentary event on reducing Britain’s reliance on Big Tech.

After last week’s newsletter, focused on the government’s new £100 million competition to back British AI start-ups, new information has come to light from the Cabinet Office regarding details of the procurement scheme.

Speaking to The Eye, a government spokesperson said that: “The Sovereign AI procurement scheme will back some of Britain’s most promising AI companies to develop new technologies, tackle major public-sector challenges, such as NHS productivity and AI for Defence, and grow their businesses here in the UK.”

“By removing barriers that too often lock smaller firms out of public contracts and allowing successful companies to retain the intellectual property they create, we are helping British businesses prove their technology, [and] compete globally while delivering better outcomes for the public.”

However, there remain central questions unanswered, as to the nature of ‘British’ ownership of intellectual property, vendor lock-in in the case of future overseas buyouts, and whether private sector or open source solutions are best for truly sovereign solutions that actually create value for Britain in the long term. So far, the answers we’ve been provided are piecemeal, and leave a lot unanswered.

Information provided to The Eye by the Cabinet Office revealed that companies must be “UK-registered’ (not necessarily UK-owned) to apply for the scheme, and have a ‘meaningful presence in the UK and are firmly anchored here, with either their founders, leadership, operating headquarters, or a large proportion of their talent based in Britain’.

Further, decisions to support the scheme were said to be ‘based on technical merit, commercial potential and strategic relevance to UK priorities’. The Eye was told that ‘successful companies will retain the intellectual property they create, allowing them to develop commercial products for customers in the UK and internationally beyond the initial pilot’.

Crucially, it was relayed that there are no equity conditions attached to the contracts, but that (presumably only the initial) funded activity must take place within the UK.

This potentially raises similar issues as with the wider £500 million Sovereign AI Fund, with criticisms being raised that if a supported firm were later to be bought out by an overseas-based Big Tech firm, the future benefits for the UK would be unclear past the initial stage of funding and development.

This kind of sell-off would be far from unheard of. Take the sale of Cambridge-based ARM Holdings, at one time considered a crown jewel of UK tech, which was bought out by Japanese conglomerate SoftBank in 2016.

Former business secretary Peter Kyle later said that if it had remained here, ARM could have become the biggest firm on the London Stock Exchange, noting that he wouldn’t have backed the sale and that it would now “be 40% of the way there to the trillion-dollar company I think our country needs”.

The same could also be said of AI company DeepMind, acquired by Google in 2014. As Kyle put it when talking to the BBC, while the company continues to operate here, “the wealth that it has created is going elsewhere”. If private companies retain their IP and can subsequently be bought out, the question is what long-term return the public receives for taking on the early stage risk.

As with the Sovereign AI Fund, the newly-released wording around companies having to have ‘either their founders, leadership, operating headquarters, or a large proportion of their talent based in Britain’ is vague enough that a company not UK-based or owned could be in receipt of some of this money. Palantir’s largest operating base outside of the US, for example, is in London.

Mainland Europe and the UK have been in many respects too late in waking up to the idea that we need a genuine alternative to reliance on a small number of tech giants for digital infrastructure, which creates the risk of vendor lock-in, inflated costs, and extraction of value from the economy, as well as the inherent security risks of having unreliable allies in control of key infrastructure.

The power Big Tech has with its near total monopoly could also lead to weaker regulation and vulnerability to an anti-democratic information space, with organisations like Open Rights Group, proposing to instead promote reliance on open source software. A recently released report by the group makes a detailed argument for how open source tools offer the most secure means of modernising critical systems and strengthening our control over our own tech.

The report highlights how open source can act as a driver for UK economic growth and domestic innovation and reduce reliance on proprietary vendors, and cites EU research that every £1 invested in open source returns around £4 in economic value.

Open Rights Group advocates for a “public code for public money strategy”, involving software developed for the public sector being made available under open source licensing, an increase in regulation of tech giants, and the re-building of UK-based technical expertise.

These were among the points presented at a parliamentary event on 7th September, co-hosted by Labour MP Clive Lewis and Green MP Sian Berry, and supported by the Citizens and Open Rights Group. The event brought together representatives of business and civil society, who briefed MPs on the urgent need to consider a range of rights-based, security, and economic concerns as the new government considers its digital sovereignty policies.

In 2025, the Bennet School of Public Policy at Cambridge released a report highlighting that the UK’s fragmented approach to AI sovereignty leaves the country open to deepening dependencies on foreign AI systems, and that a core problem was that policymaking at the time was ‘disconnected from institutional adoption commitments’.

The report found that ‘industrial strategy insights are not linked to procurement policies’, with partner agreements with companies treated more as access agreements than an actual focus on building out domestic capabilities.

The steps that it suggested to help fix the current structure were to include assessments of whether public spending builds UK capabilities or re-enforces dependencies, preventing anti-competitive practices potentially locking the country into proprietary systems and creating space for genuine UK alternatives, and also to connect open-source development with ‘institutional adoption to position the UK as a hub for open-source AI’.

As the Burnham administration considers its next steps, it is crucial for the government to sufficiently consider and address concerns related to what “buying British” will actually mean and how our rights, security infrastructure, and economy will be protected. The piecemeal nature of the information released so far, loopholes apparent within the announcements to date, and lack of clarity from the government are only serving to fuel growing speculation and criticism.

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About The Eye: In an era where Silicon Valley is rewriting the rules of governance and unaccountable tech companies are capturing our public services from the inside out, The Eye exists to follow the power, connect the dots and reveal how technology is reshaping our state.