27 Nov 2025

November 2025 Budget - Impact on AI Industry

The Chancellor delivered her second Budget yesterday, with a headline of a £26 billion increase in taxes. The details of the Budget emerged earlier than planned after the Office for Budget Responsibility (OBR) accidentally released its analysis, outlining a range of tax increases she is set to introduce in a bid to address the shortfall in the public finances. Reeves’s much-anticipated Budget sets out the UK’s economic and fiscal prospects for the period to 2030–31, incorporating new data with the Government’s latest policy measures. An average real GDP growth of 1.5 per cent over the projection period has been forecasted; the figure is slightly weaker than anticipated in March 2025 following a downward revision to productivity growth forecasts.

The Budget details limited plans for the AI industry, with many of the announcements duplicating commitments already made by the Government, such as the AI Growth Zone announcements made earlier this month. However, we have identified a number of areas that will have an impact on AI businesses, particularly scale-ups.

UK Economy

  • The Office for Budget Responsibility (OBR) has emphasised the crucial role of AI in unlocking economic growth: ‘the pick-up in productivity growth over the forecast period is based on judgements about the effect that the fading of some past negative shocks, the impact of artificial intelligence technology, and a boost from planning reforms announced in March.’
  • The Budget has frozen thresholds for National Insurance (NI) paid by employers until 2031.
  • The Chancellor has committed to reducing the annual regulatory burden by £5.6 billion by the end of the Parliament, including through planning reform and streamlined corporate reporting. 



AI Industry

Although there was little net-new investment, some existing programmes and budgets have been confirmed:

  • The Budget has confirmed that the Government will invest up to £2 billion by 2030 in a ‘modern public compute ecosystem’ to support AI and advance research. This comprises over £1 billion to expand the AI Research Resource (AIRR) programme by 20x by 2030 (originally announced in January 2025), up to £750 million for a new national supercomputer service at the Edinburgh Parallel Computing Centre (originally announced in June 2025), and an advance market commitment of up to £100 million to purchase novel compute (originally announced last week).
  • The Government will build on its AI Growth Zone initiative, introducing two more growth zones in North and South Wales that the chancellor believes will deliver 3,400 and 5,000 new jobs respectively over the next decade. The Government has guaranteed that each of these zones will be supported with £5 million investment in local AI adoption and skills, with £10 million of government investment in semiconductor activity in South Wales. (Originally announced 13th November)
  • DSIT’s ‘AI for Science Strategy’ is being funded with £137 million over four years, with the aim to improve research productivity. (Originally announced 20th November) 


Entrepreneurs

  • The Government published an ‘Entrepreneurship in the UK’ prospectus, providing a strategic view of how the individual announcements in the budget, and previous announcements, will support UK entrepreneurs. 
  • The Government has also confirmed that Research and Development (R&D) investment will increase to £22.6 billion a year by 2029-30, with UK Research and Innovation (UKRI) channelling £9 billion over four years into targeted priority sectors, including £4.5 billion for innovative companies operating within these sectors across the UK. The IS-8 sectors defined in the Industrial Strategy include: Advanced Manufacturing, Creative Industries, Clean Energy Industries, Defence, Digital and Technology, Financial Services, Life Sciences, Professional and Business Services.
  • Innovate UK will co-ordinate a £130 million Growth Catalyst programme for ‘frontier’ companies that have already attracted investment, with £500 million in R&D Missions Accelerator funding. (Originally announced June 2025)
  • The Enterprise Management Incentives Scheme (EMI) has been expanded to enable scale-ups to offer tax-advantaged shares to workers. The employee limit is increased to 500, the gross assets test is now £120 million and the company share option limit will be £6m from April 2026. The maximum holding period will increase to 15 years, including for existing EMI contracts. (This will be legislated in the Finance Bill 2025-26)
  • The Venture Capital Trust (VCT) and Enterprise Investment Scheme (EIS) limits will be increased to £10m to incentivise follow-on investment (£20m for Knowledge Intensive Companies). The lifetime company investment limit will be £24 million (£40m for KICs). The Gross Asset Test will increase to £30m, but VCT income tax relief is being decreased to 20% from the current 30%. (This will be legislated in the Finance Bill 2025-26)
  • The British Business Bank (BBB) will invest at least £5 billion in growth-stage funds and scale-ups. The budget also mentions that the BBB will explore using its existing financial guarantee capacity to support intellectual property (IP) backed lending. The Entrepreneurship Prospectus mentions that the bank will support at least ten new-to-market growth-stage fundraisings over the next five years. 
  • The Government has announced a new UK Listing Relief, a three-year exemption from Stamp Duty Reserve Tax on shares for companies that list in the UK.
  • £4m of new UKRI Enterprise Fellowships have been announced, alongside ​​£25 million for new entrepreneurship-focused doctoral training schemes, in addition to a new £4.5 million round of Women in Innovation Awards, to close the gender entrepreneurship gap, which is estimated to be worth up to £250 billion to the UK economy. 
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