The US has halted billions of pounds in promised investments for British technology, resulting in a significant setback in US-UK relations.
The £31bn ‘tech prosperity deal’, celebrated by Keir Starmer as a ‘generational leap forward in our relationship with the US’ during Donald Trump’s state visit, is now on hold by Washington.
Under this deal, US tech firms were set to invest billions in the UK, including £22bn from Microsoft and £5bn from Google. However, the US government has suspended the deal’s implementation, pointing to insufficient progress from the UK in reducing trade barriers across other areas.
Although British officials attempted to minimize the implications of this situation, it was first reported by the New York Times. The publication noted that the Trump administration is dissatisfied with the UK’s ongoing digital services tax on US tech companies and food safety regulations that restrict exports of certain agricultural goods.
A government official from the UK stated that it was just “typical hard-nosed negotiations from the US side” and that the deal—which permitted tariff-free exports of British medicines to the US—remains intermittently active until it reaches finalization.
“[The US commerce secretary] Howard Lutnick is a tough negotiator. We recognize that the American side is engaged in incredibly tough discussions, but we will hold our position. They prioritize their interests, and we prioritize ours,” the official commented.
Another official remarked that this moment is “part of a negotiation strategy” with the US government.
The Prosperity Deal encompasses the establishment of an artificial intelligence “growth zone” in north-east England, which British officials anticipate could yield up to £30 billion and create 5,000 jobs.
However, the agreement states that it “will only become effective if significant progress is made towards formalization and implementation.”
The decision to suspend the deal is a setback for the UK government, which had promoted it as the culmination of a year of intense discussions with the US to avert damaging tariffs on British exports. Starmer had notably hosted Trump’s second state visit at Windsor Castle in September, an unprecedented honor for a US president.
Mr. Starmer has resisted US demands to abolish or modify the digital services tax, a 2% levy on the profits of tech giants like Amazon, Google, and Apple, generating approximately £800m annually. President Trump has issued multiple threats of retaliation against nations with such taxes, including the UK.
The Guardian disclosed that during spring trade negotiations, the UK government proposed a plan to adjust the taxes paid by US tech firms, extending it to a broader array of companies without lowering the overall tax total. To date, there have been no changes to the tax structure.
Additionally, the US has exerted pressure on the UK regarding its online safety regulations, with officials committing to reassess their enforcement during the discussions.
Another point of contention is the UK’s food safety regulations, which ministers acknowledge pose a challenge from the US. The UK government had resolved to reduce tariffs on some US agricultural imports, including beef, while adhering to its manifesto commitment to uphold agricultural standards.
Weakening these standards could open the door for chlorine-washed chicken and hormone-treated beef from the US to be sold in the UK, a prospect that has sparked intense debate among farmers and consumer advocates.
At a press conference in September to announce the Technology Prosperity Deal, Mr. Starmer proclaimed that it possessed the “potential to transform lives” and “revitalize our special relationship for a new era.”
“This is an opportunity for technologies such as AI and quantum to enhance human capability, tackle problems, cure illnesses, generate wealth, advance freedom, and strengthen democracy over tyranny,” the Prime Minister asserted. “This is the domain where we will secure the future.”
At the time, President Trump remarked that the deal would aid both the US and UK in “dominating” the artificial intelligence sector and “ensuring that we can jointly lead the next monumental technological revolution.”
Commerce and Trade Secretary Peter Kyle was recently in the United States for discussions with Mr. Lutnick, Trade Representative Jamieson Greer, and Treasury Secretary Scott Bessent. Their talks encompassed tariffs on whiskey and steel, as well as collaboration on critical minerals. Kyle’s department indicated that negotiations are expected to resume in January.
A spokesperson for the UK government stated: “Our special relationship with the US remains robust, and the UK is steadfastly committed to the Technology Prosperity Agreement, which aims to create opportunities for diligent individuals in both nations.”
The Guardian reported that Mr. Starmer is expected to select a new ambassador to Washington after interviewing three candidates last week. The shortlisted candidates include Varun Chandra, the Prime Minister’s business advisor who played a crucial role in negotiating the Prosperity Deal; Christian Turner, the next ambassador to the United Nations; and Nigel Casey, Ambassador to Russia.
Source: www.theguardian.com
