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

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

Yahoo16-02-2025

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'.
Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month with unlimited access to our award-winning website, exclusive app, money-saving offers and more.

Orange background

Try Our AI Features

Explore what Daily8 AI can do for you:

Comments

No comments yet...

Related Articles

The US and China have reached a trade framework after 2 days of talks in London, says China's negotiator
The US and China have reached a trade framework after 2 days of talks in London, says China's negotiator

Business Insider

timean hour ago

  • Business Insider

The US and China have reached a trade framework after 2 days of talks in London, says China's negotiator

The US and China have finally made progress in trade talks. Li Chenggang, China's Vice Minister of Commerce, told China's state broadcaster CGTN on Tuesday evening that the countries reached an agreement on a trade framework after two days of talks in London. The Chinese negotiator told reporters in a media appearance that the US and China held "professional, rational, in-depth, and candid" discussions over the past two days. He added that the new framework will implement the consensus reached by the two presidents during their phone call on June 5 and at the Geneva talks last month. The US trade negotiation team comprised Secretary of the Treasury Scott Bessent, Secretary of Commerce Howard Lutnick, and Trade Representative Jamieson Greer. There are no further details at the moment on what the framework looks like, or if the US has made progress on ensuring that critical minerals essential for chips, automakers, and the defense industry continue to flow from China. The White House and the Chinese Embassy in Washington, DC did not immediately respond to a request for comments.

Trump's AI czar downplays risk AI chip exports could be smuggled
Trump's AI czar downplays risk AI chip exports could be smuggled

CNBC

timean hour ago

  • CNBC

Trump's AI czar downplays risk AI chip exports could be smuggled

White House AI czar David Sacks on Tuesday downplayed the risk that coveted American AI chips could be smuggled to bad actors, and expressed concern that regulating U.S. AI too tightly could stifle growth and cede the critical market to China. "We talk about these chips like they could be smuggled in the back of a briefcase. That's not what they look like. These are server racks that are eight feet tall and weigh two tons," Sacks said at the AWS summit in Washington."They don't walk out doors. It's very easy to basically verify that they're where they're supposed to be," he said. The comments indicated President Donald Trump's approach to AI could be centered on expanding markets abroad for U.S. AI chips and models. Former President Joe Biden had emphasized policies that countered risks the chips could be diverted to China and used to bolster Beijing's military."I do worry we're on a trajectory where fear could overtake opportunity and we end up sort of crippling this wonderful progress that we're seeing," Sacks said, citing a raft of bills in state legislatures seeking to regulate AI, as well as permitting challenges facing companies seeking to build the data centers that power AI. Trump rescinded Biden's executive order aimed at promoting competition, protecting consumers and ensuring AI was not used for misinformation. He also rescinded Biden's so-called AI diffusion rule, which capped the amount of American AI computing capacity that some countries were allowed to obtain via U.S. AI chip imports."We rescinded that Biden diffusion rule, diffusion a bad word. Diffusion of our technology should be a good word," Sacks said. The Trump administration and the United Arab Emirates also announced a plan last month for the Gulf country to build the largest artificial intelligence campus outside the U.S. after Biden in 2023 put in place rules that curbed most AI chip shipments to the aim at that regulation, Sacks said, "What play are we giving them? We're basically going to push them into the arms of China."He added that if, in five years, AI chips made by sanctioned Chinese telecoms equipment giant Huawei were everywhere, "that means we can't let that happen."The need to remove hurdles to U.S. AI innovation is urgent as China has made important advances in its AI models, Sacks said. This year, the Chinese AI app DeepSeek shocked the world with its sophisticated, affordably trained model. "China is not years and years behind us in AI. Maybe they're three to six months," said Sacks. "It's a very close race." The White House later said he was referring to China's AI models, adding that Chinese AI chips are one to two years behind their U.S. counterparts.

CNBC Daily Open: The U.S. stock market could be a little too optimistic
CNBC Daily Open: The U.S. stock market could be a little too optimistic

CNBC

timean hour ago

  • CNBC

CNBC Daily Open: The U.S. stock market could be a little too optimistic

The U.S. stock market appears a little too optimistic. All three major indexes climbed Wednesday, with the S&P 500 and Nasdaq Composite enjoying their third consecutive session in the green. The S&P, in fact, is around 2% away from its all-time high, which it reached in February. That's despite the shadow of U.S. President Donald Trump's "reciprocal" tariffs still haunting the economy. As the 90-day tariff pause ticks down, America, so far, has just one deal, struck with the U.K., and an agreement with China that, while reaffirmed by both sides after two days of negotiations in London, is still preliminary and keeps tariffs at double-digit levels. Corporations are seemingly bracing for economic fallout already. Layoffs have been accelerating this year. Google and Paramount on Tuesday joined Microsoft, Citigroup and Disney in announcing headcount cuts. (However, it should be noted that layoffs, rather perversely, tend to push up stock prices because they are a cost-cutting measure.) And the bond market, the sterner sibling of the stock market, might put a check on investor enthusiasm. If there are unexpected results from U.S. inflation data and Treasury auctions on Wednesday and Thursday, yields could rise again, not only putting pressure on stocks, but also the broader economy in terms of higher borrowing costs. The stock market, then, seems to be betting on more trade breakthroughs and favorable inflation data. But the bond market and CEOs might not be so sure about that. U.S. and China reach trade frameworkThe U.S. and China have reached a consensus on trade, representatives from both sides said, following a second day of high-level talks in London, according to an NBC transcript. "We have reached a framework to implement the Geneva consensus and the call between the two presidents," U.S. Commerce Secretary Howard Lutnick said. That echoed comments from the Chinese side, shared via a translator. S&P 500 notches three-day win streakU.S. stocks rose Wednesday. The S&P 500 advanced 0.55% and the Nasdaq Composite climbed 0.63%, the third day of gains for both indexes. The Dow Jones Industrial Average added 0.25%. The pan-European Stoxx 600 index closed mostly flat after struggling for direction most of the day. The U.K.'s FTSE 100 added 0.24%, an inch away from its record in March. Shares of Tesla regain groundTesla shares rose 5.7% Tuesday to close at $326.09, leaving the stock about $6 short of where it was trading last Wednesday, when it sank 14% after CEO Elon Musk publicly feuded with Trump. The latest jump came after Musk shared a video on X showing that Tesla was testing driverless vehicles on the roads of Austin, Texas. Musk said Tuesday Tesla's robotaxi service is "tentatively" set to launch in Austin on June 22. Bond market in focus The U.S. Bureau of Labor Statistics releases data on May's consumer prices on Wednesday, then producer prices on Thursday. At the same time, the government will hold sales of long-duration Treasurys on the same days. Together, those results could have important implications for the direction of the economy and the reaction of the Federal Reserve and its approach to interest rate policy, reported CNBC's Jeff Cox. Fund houses warn of 'capital outflows'Trump's "One Big Beautiful Bill Act" aims to penalize foreign-owned firms operating in the U.S. and that are from countries with "unfair foreign taxes" under a provision known as Section 899. The Investment Company Institute, which represents fund houses in the U.S., is lobbying Congress for an amendment, warning Section 899 could cause investors to "retreat quickly from US equities," leading to "capital outflows." Google offers buyoutsGoogle on Tuesday offered buyouts to employees in several divisions. Affected units include knowledge and information — which houses the company's search, ads and commerce divisions — and central engineering units as well as marketing, research and communications teams, CNBC has learned. Google has done multiple buyout offers in a few units this year, making it a preferred strategy to reduce headcount. [PRO] Tesla shares to drop 60%: Wells FargoEven though investors were enthused by the prospect of Tesla rolling out its robotaxi service in the future, Wells Fargo analysts think that feature won't be able to offset the company's weak sales that will trend "meaningfully weaker." The bank expects Tesla's shares to plunge around 63% from Tuesday's close. 2025 CNBC Disruptor 50: See the full list of companies leading new era of AI breakthroughs and riches The race for global supremacy in AI and the existential threat it represents to the status quo in the tech industry, and beyond, has led to record venture investment in startups. The top five companies on this year's Disruptor 50 list — including a new No. 1 Disruptor from the defense tech sector — have a combined valuation of just under $500 billion. That is more than the combined total valuation of almost every past Disruptor 50 list over the last 12 years. But it's never just about the money or size in the Disruptor 50 selection process, and it is far from all agentic AI and chatbots. The list includes new business models emerging in a wide range of areas, from agriculture to autonomous transportation and health care.

DOWNLOAD THE APP

Get Started Now: Download the App

Ready to dive into the world of global news and events? Download our app today from your preferred app store and start exploring.
app-storeplay-store