The next British boom could be in the offing – if Starmer abandons net zero

Yahoo

16-02-2025

Back in mid-January, as the full impact of Rachel Reeves's tax-raising October Budget began to hit home, consumer and business sentiment plunged.
Keir Starmer badly needed a new growth narrative to try to convince voters and investors the UK economy, having shrunk in two of the previous three months, would soon bounce back.
The Prime Minister reached for artificial intelligence (AI) before his Chancellor, even more desperate for a growth-boosting story, unleashed that hardy political perennial a fortnight later: 'the Government backs a new third runway at Heathrow'.
The expansion of our leading airport won't happen for at least a decade. The only people Reeves's Heathrow announcement will enrich before the next election, amid renewed courtroom battles, are Starmer's legal chums.
But AI is different. The rapid development of generative AI, sometimes referred as 'the fifth industrial revolution', will profoundly impact the world.
The first three 'revolutions' took 250 years – steam power and mechanisation from the 1750s, followed by steelmaking and electrification then widespread computation by the end of the 20th century.
Industrial Revolution 4.0 was the first two decades of this century – the spread of internet connectivity and 'mass data-fication', with much of what has ever been written now instantly and widely accessible.
And since around 2020, the AI revolution – increasingly powerful computers 'leveraging' or making more use of that connectivity and information access – has been in full swing.
In manufacturing, AI is already boosting efficiency by optimising production processes and facilitating 'predictive maintenance' – so machinery can be fixed before it breaks down.
Across many sectors, AI is automating design processes, improving supply-chain management and quality control.
AI-driven chatbots are now widely used by firms to field customer enquiries – they're still quite clunky, and sometimes annoying, but rapidly improving.
That's the 'generative' bit – AI allows machines to 'learn', as large language models rapidly trawl ever-expanding reams of available text and data, absorbing increasingly complex trends and patterns, allowing computers to 'think'.
AI-driven robots and machines will be able to – already can – make decisions and change behaviour on their own. And their very operation means they can handle increasingly complex tasks and adapt to changing circumstances, making them more flexible and efficient across a huge variety of tasks.
What we're seeing now is a multibillion-dollar race, not least between US and Chinese firms, to dominate the AI market. At stake is enormous power over access to information and the processes that will increasingly dominate consumer, business and indeed government behaviour across the world.
Part of Starmer's recent pledge to 'turbocharge AI' involved 'the public sector spending less time doing administration'. So why is the payroll of our already bloated Civil Service still rapidly expanding?
Of all the applications of AI, the one that excites me least – and will do little to boost the economy – relates to the UK's state apparatus.
Our public sector is often terrible at adopting new technology. Years after the NHS spent endless billions of pounds on a new IT system, basic information sharing across a sprawling organisation, even among qualified professionals, remains ghastly.
And as for 'joined-up government' malarkey – well, good luck with that. Whitehall departments detest sharing data, most of all with other departments. Changing that culture will take decades, whatever the technology.
In the real world, though, for consumers and businesses alike, the potential benefits of AI are nothing short of mind-blowing. But so are the potential pitfalls – in terms of the jobs, privacy and even safety of pretty much the entire human race.
In Paris last week, JD Vance made his first major policy speech since becoming US vice president last month, framing AI as an economic turning point while issuing a note of caution. 'It will never come to pass,' he said, 'if overregulation deters innovators from taking the risks necessary to advance the ball'.
Vance was taking aim at the European Union, which produced a document amounting to the first international effort to regulate AI, pledging to ensure 'AI is open, inclusive, transparent, ethical, safe, secure, and trustworthy.'
While signed by scores of countries, including China, both the US and the UK refused. Regulating AI is, at best, going to be extremely tough, on a global basis surely impossible.
The UK has huge talent in this area. British whizz kids created DeepMind – a firm which made major breakthroughs in machine learning, advanced algorithms and systems neuroscience. But a lack of smart, British-based capital saw the company gobbled up by US giant Google back in 2014, although DeepMind's HQ remains in the UK.
The House of Lords Communications and Digital Select Committee this month rightly warned Britain could become merely an 'incubator' of AI firms, without the capital and infrastructure to help our promising minnows to 'scale up'.
The UK certainly need the growth-boosting impact of this AI revolution. GDP grew a paltry 0.1pc during the final quarter of last year, as Britain flirts with recession.
But amid all the questions swirling around the UK's part in this fifth industrial revolution, another looms large – namely power supplies.
The mass of computers packed in the data centres that drive AI generative systems demand huge amounts of energy. AI-related activities used 3.6 terawatt-hours (TWh) of electricity in 2020. If this sector expands 20-fold over the next five years, as per the government's target, that implies 72 TWh by 2030 – a quarter of the UK's current total consumption.
National Grid bosses have long been warning our electricity system is 'constrained', with 'bold action' needed to cope with 'dramatically' growing demand.
So here's a prediction. Starmer will need to choose between his 'AI revolution' and Ed Miliband's mad-cap net zero scheme to 'decarbonise the National Grid'.
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