A deal that binds one side only
Writing for Tech Policy Press on 27 October, Megan Kirkwood argues that the revival of the UK-US Tech Prosperity Deal is only partial, and that renewed talks raise the question of whether the UK will give up digital regulatory powers to get closer to Washington. Read the deal’s own text alongside a new Trade Justice Movement report and the imbalance is plain. The memorandum the two governments signed in September 2025 creates no legal obligations and commits neither side to spend money. The trade rules the US has put into its recent agreements could bind the UK tightly, and the regulation they would constrain falls mainly on the American firms that the UK relies on to build its AI infrastructure.
Strategic Reality: The question for the Burnham government is not whether US investment matters to UK AI. It is whether investment announced alongside a memorandum that binds no one is worth trade commitments that would bind the UK.
What the deal actually contains
A memorandum, not a treaty
The memorandum of understanding covers AI, civil nuclear power, quantum computing and research security. On AI, the two governments say they intend to collaborate on building AI infrastructure, and its focus areas include promoting US and UK AI exports that “offer the full stack of chips, data centers, and models”. It also links the UK AI Security Institute with the US Center for AI Standards and Innovation.
Two clauses matter more than the rest. The text says it “does not constitute or create and is not intended to constitute or create any legally binding obligations”, and that “Nothing in this MOU commits the participants to the expenditure of funds.” Another clause ties its start date to trade: the memorandum “becomes operative alongside substantive progress” being made on the separate US-UK Economic Prosperity Deal. From the day it was signed, the technology partnership depended on progress in trade talks.
Critical Context: Because the memorandum only takes effect alongside progress on the wider trade deal, AI cooperation was a bargaining chip from the start. When trade disagreements persisted, the tech deal fell through, as Kirkwood describes.
The £31 billion that came with it
The investment headlines were separate company announcements. The government’s launch press release said firms including Microsoft, NVIDIA, Google, OpenAI and CoreWeave would commit a combined £31 billion to UK AI infrastructure and technology. Microsoft’s pledge was $30 billion (£22 billion), its largest ever UK commitment, which we reported at the time. OpenAI was to work with the British firm Nscale on a Stargate UK project.
| Item | Figure | What it means |
|---|---|---|
| Combined US company pledges at launch | £31 billion | Announced alongside the memorandum, not written into it |
| Microsoft’s UK pledge | $30 billion (£22 billion) | Still described as a promise in October 2026 Guardian reporting |
| Digital Services Tax rate | 2% | Charged on UK-user revenue of large search, social media and marketplace groups |
| Tariff threat against digital taxes | 100% | Threatened by Trump in June 2026 |
| Firms designated under the UK’s digital competition regime | 2, both American | Apple and Google, per the Trade Justice Movement report |
Where the deal stands a year on
The pledges have proved soft
In April, the Guardian reported that OpenAI had put Stargate UK on hold, blaming the cost of energy and regulation. OpenAI said it “continue[s] to explore Stargate UK”. The paper said its commitments had always been vague: the core of the plan was that OpenAI would “explore the offtake” of 8,000 Nvidia chips at sites built by Nscale. We looked at what that pause meant for UK strategy in April. Kirkwood goes further, writing that “investment pledges linked to the deal have been abandoned”.
Other pledges face a different obstacle. On 22 October the Guardian reported that a taskforce including Nvidia, Microsoft and Cisco had told ministers they have roughly a year to defuse local resistance to datacentres before it puts construction at risk. Kirkwood notes that public opinion largely opposes the buildout the deal depends on.
Reality Check: The memorandum commits no one to spend money, and the company pledges sit outside it. OpenAI’s pause shows how little that kind of pledge guarantees.
The demands have stayed hard
Kirkwood reports that the Financial Times found talks restarting in February, with no agreement on the Digital Services Tax or online safety rules. Pressure has grown since. TIME reports that in June Trump threatened to put a 100% tariff on goods from countries that tax US firms’ digital services. In August Jamieson Greer, the US Trade Representative, said in a Times interview the threat was “not a bluff” and accused Britain of using American companies as “piggy banks”.
The UK government replied that it remains “open to discussing U.S. concerns”, while also saying the tax is an interim measure that it will remove “once a global solution is in place”. Politico Europe reported that the tax “raised over £1 billion last year”, mostly from American tech firms.
Why the price falls on the rulebook
A dominant market turns neutral rules into “discrimination”
The Trade Justice Movement report, The Price of the Deal, written by Daniel Rangel Jurado and published this month, explains why this matters beyond one tax. US-style trade agreements include rules that bar discrimination against digital products. Under trade law, a measure that is neutral on its face can still count as discriminatory if it changes competition to the disadvantage of the other party’s firms, which is known as de facto discrimination.
Because a few US firms dominate search, social media, app stores, cloud and AI, the report argues that “almost any regulation aimed at market power, scale, or systemic risk will, in practice, fall most heavily on those firms.” The tools governments use to spare smaller companies, such as revenue thresholds, user-number thresholds and tiered obligations, can be turned into the basis of a trade complaint. In the report’s words, “the more concentrated the market, the harder it becomes to regulate it without providing grounds for a trade claim.”
The UK’s digital competition regime shows the problem. The UK’s competition regulator, the CMA, has designated Google for general search and Apple and Google for their mobile platforms. The report says both are American because of how the markets are structured, not because of bias in the Digital Markets, Competition and Consumers Act, but warns that the list of designated firms “could provide the starting point for a claim”.
Strategic Insight: Kirkwood’s piece warns about the UK’s reliance on US tech giants, and the report adds a second side to that reliance. The UK depends on US firms for AI infrastructure, and the report says the measures most exposed to trade rules are those reaching the largest firms, which in digital markets means US firms. A trade rule limiting that regulation would, in practice, mainly bind the UK.
The AI exposure is in laws not yet written
The UK has not passed a general AI law, so the report treats the AI risk as one for future laws. The AI Security Institute currently gets pre-release access to frontier models through voluntary agreements with the major developers. A law making that testing mandatory would likely apply before a model reaches the market, cover developers by capability rather than by wrongdoing, and need access to algorithmic detail, possibly including source code.
US-style source-code clauses only allow compelled access for a “specific investigation, inspection, examination, enforcement action, or judicial proceeding”, so a standing testing regime would fall outside that exception. Most of the firms such a law would cover are American, which the report says could let a UK-US agreement be used to challenge it. The report also notes that some trade deals the UK is already party to contain source-code clauses that could limit future AI regulation, so a US deal would add to an exposure that partly exists already.
Warning ⚠️: According to the Trade Justice Movement, Andy Burnham, the Prime Minister, has said fundamental decisions about AI “must be taken by elected governments”. The report warns that source-code clauses of the US kind could be used to challenge what an elected UK government later requires of frontier AI developers.
Who is affected
Ministers and trade negotiators. The report says the UK has deliberately left digital non-discrimination clauses out of its other digital trade deals, and told Japan it did not intend to include them. It also says every one of the second Trump administration’s reciprocal trade agreements so far has included them, and that it is “unclear whether the UK could resist” the same demand.
Ofcom and the CMA. The report says a non-discrimination clause would give the US a legal basis it currently lacks to challenge the competition regime’s designations, the Online Safety Act’s categorisation thresholds and the Digital Services Tax itself.
The AI Security Institute and AI developers. Any move from voluntary to mandatory pre-deployment testing could run into source-code clauses of the kind the report describes.
Communities near proposed datacentres. The investment side of the deal rests on a datacentre buildout that, by industry’s own account, has about a year to win public consent.
Open challenges
The US decides what its own deals mean. The report argues that the main risk is not losing disputes before an independent tribunal. It is that UK officials would narrow or shelve measures in advance to avoid a confrontation. It warns of “a poor bargain on the substance” and of a deal where “the substance would not be settled by the bargain at all”, because the party that writes the template also judges compliance.
Canada has already given way. The report records that Canada rescinded its digital services tax outright in June 2025 under US pressure. The UK has kept its tax so far, and the Burnham government’s August statement left room to talk.
Sovereignty is still undefined. Kirkwood points out that the EU has an official tech sovereignty strategy while the UK’s idea of sovereignty is murkier. Without a clear statement of what the UK must control, it is hard to say which concessions cross a line.
What to watch
Red lines before talks. The Trade Justice Movement wants ministers to draw firm red lines covering AI regulation, the powers of Ofcom, data protection and the Digital Services Tax, and to give Parliament a real role in scrutinising any agreement. A public statement of those limits before a deal is struck would show the Burnham government is negotiating on its own terms.
How ministers describe the tax. The current position is removal once a global solution exists. A move to removal in exchange for tariff relief would show that the tax is being traded.
Any digital chapter in a revived deal. If a text emerges, check it for non-discrimination rules on digital products and for source-code clauses. Their absence would show the UK held the line it once took with Japan.
Mandatory AI testing. The report says the AI minister has said the UK would consider regulating advanced models if voluntary testing stopped being enough. If ministers bring forward a bill while trade talks are live, it will show whether trade worries are shaping AI law.
Kirkwood ends by warning that a renewed tech deal could trade away the tools the UK has to rein in the tech giants. The memorandum’s own text supports her caution. On paper, the UK would get investment announced alongside a memorandum that binds no one; in return it could accept trade rules that would bind it. That imbalance, more than the size of any headline figure, is what the Burnham government’s choices will reveal.
Source: The UK-US Tech Deal Exposes the Limits of Britain’s AI Ambitions (Tech Policy Press, 27 October 2026), by Megan Kirkwood. Additional sources: The price of the deal (Trade Justice Movement, October 2026), by Daniel Rangel Jurado, and its launch release; US-UK Technology Prosperity Deal memorandum of understanding (gov.uk); US-UK pact will boost advances in drug discovery, create tens of thousands of jobs and transform lives (gov.uk); Digital Services Tax (HM Treasury and HMRC); OpenAI pulls out of landmark £31bn UK investment (the Guardian, 9 April 2026); AI firms say UK has a year to head off datacentre protests (the Guardian, 22 October 2026); UK responds to mounting Trump pressure over digital services tax (TIME, 19 August 2026); UK open to discussing digital services tax with Trump administration (Politico Europe, 19 August 2026).
This strategic analysis was written by Resultsense, a UK-focused AI news and analysis publication. We will be watching whether a revived UK-US deal carries digital trade clauses, and what happens to the Digital Services Tax. For related analysis, see how a US directive on Anthropic exposed Britain’s AI dependence. Read more analysis at Insights, or get in touch.