Why US has suspended its £31B tech investment in UK
What's the story
The United States has temporarily suspended its multi-billion-pound investment in British technology, a major blow to US-UK relations. The £31 billion "tech prosperity deal," which was hailed as a major milestone in the US-UK relationship during Donald Trump's state visit, has been put on hold by Washington. Under this agreement, American tech giants had promised significant investments in the UK, including £22 billion from Microsoft and £5 billion from Google.
Stalemate
Trade disagreements stall tech prosperity deal
The US has halted the deal's implementation over trade disagreements, particularly Britain's digital services tax on American tech firms and its food safety rules. Speaking to The Guardian, a British government source described it as "the usual bit of hardball negotiations by the Americans," citing previous instances where similar issues were resolved after tough negotiations.
Economic impact
AI growth zone and job creation
The tech prosperity deal also promised the establishment of an artificial intelligence "growth zone" in northeast England, with potential earnings of up to £30 billion and 5,000 jobs. However, the agreement's text stated it would only be implemented if substantial progress was made in formalizing and implementing it. The suspension is a blow for the UK government, which had touted this deal as a major achievement of its year-long negotiations with the US to avoid tariffs on British exports.
Standoff
UK's stance on digital services tax
UK Prime Minister Keir Starmer has resisted US pressure to scrap/amend the digital services tax, a 2% levy on tech companies' revenues. The UK government had proposed reducing payments by US tech companies during trade negotiations this spring but no changes have been made so far. The US has also pushed for changes in UK's online safety rules and raised objections to its food safety regime.