<\/p>\n
The US has paused its promised multi-billion-pound investment into British tech over trade disagreements, marking a serious setback in US-UK relations.<\/p>\n
The \u00a331bn \u201ctech prosperity deal\u201d<\/a>, hailed by Keir Starmer as \u201ca generational stepchange in our relationship with the US\u201d when it was announced during Donald Trump\u2019s state visit, has been put on ice by Washington.<\/p>\n As part of the deal, US tech companies pledged to spend billions in the UK, including a \u00a322bn investment from Microsoft and \u00a35bn from Google. But Washington has paused the implementation of the agreement, citing a lack of progress from the UK in lowering trade barriers in other areas.<\/p>\n British officials sought to downplay the development, which was first reported<\/a> by the New York Times. The newspaper said Trump\u2019s administration was unhappy about the UK continuing to levy a digital services tax on American tech companies and its food safety rules, which bar the export of certain agricultural products.<\/p>\n One British government source said it was \u201cthe usual bit of hardball negotiations by the Americans\u201d and said that the deal to allow tariff-free British pharmaceutical exports to the US<\/a> was on and off before it was finalised.<\/p>\n \u201c[The US commerce secretary] Howard Lutnick is a tough guy. We understand that the Americans negotiate incredibly hard but we\u2019ll stand our ground. They want what\u2019s best for their country, we want what\u2019s best for ours,\u201d the source said.<\/p>\n A second government source said the development was \u201cpart of the shape of the negotiations\u201d with Washington.<\/p>\n The prosperity deal included the creation of an artificial intelligence \u201cgrowth zone\u201d in the north-east of England, which UK officials said could bring in up to \u00a330bn and create 5,000 jobs.<\/p>\n But the text of the agreement stated that it only \u201cbecomes operative alongside substantive progress being made to formalise and implement\u201d it.<\/p>\n The decision to put it on hold is a blow to the UK government, which touted the agreement as a prize of its intensive year-long engagement with the US to avoid punitive tariffs on British exports. As part of his diplomatic charm offensive, Starmer hosted Trump for a second state visit at Windsor Castle in September, an unprecedented honour for a US president.<\/p>\n Starmer has resisted US pressure to scrap or amend the digital services tax, a 2% levy on the revenues of tech companies including Amazon, Google and Apple that raises about \u00a3800m a year. Trump has repeatedly threatened to retaliate<\/a> against countries with digital taxes, including the UK.<\/p>\n The Guardian revealed<\/a> that during trade negotiations in the spring, the government drew up proposals to reduce the amount paid by US tech companies and by applying the tax to a wider range of companies without reducing its total take. But so far the tax has remained unchanged.<\/p>\n The US has also exerted pressure over the UK\u2019s online safety rules, with officials promising to review their enforcement during the talks.<\/p>\n A third area of contention has been the UK\u2019s food safety regime, with ministers admitting that the US has raised objections to it. As part of the trade deal the government agreed to lower tariffs on some US agricultural products including beef, but it has stood by its manifesto commitment not to water down farming standards.<\/p>\n Any decision to weaken these could open the door to American chlorine-washed chicken<\/a> or hormone-treated beef being sold in Britain, a prospect that has long been highly controversial with farmers and consumer groups.<\/p>\n At a press conference at Chequers in September, where he unveiled the tech prosperity deal, Starmer said it had \u201cthe power to change lives\u201d and \u201crenewed the special relationship for a new era\u201d.<\/p>\n \u201cIt\u2019s our chance to ensure that technologies like AI, quantum and others amplify human potential, solve problems, cure diseases, make us richer and freer, strengthen democracy not tyranny,\u201d the prime minister said. \u201cThis is the territory on which the future will be won.\u201d<\/p>\n Trump at the time said the deal would help the US and UK \u201cdominate\u201d in the world of artificial intelligence<\/a> and \u201censure our countries lead the next great technological revolution side by side\u201d.<\/p>\n Peter Kyle, the business and trade secretary, was in the US last week for negotiations with Lutnick, the US trade representative, Jamieson Greer, and the US treasury secretary, Scott Bessent. Their discussions touched on whisky and steel tariffs and collaboration on critical minerals. Kyle\u2019s department said talks were due to continue in January.<\/p>\n A UK government spokesperson said: \u201cOur special relationship with the US remains strong and the UK is firmly committed to ensuring the tech prosperity deal delivers opportunity for hard-working people in both countries.\u201d<\/p>\n