UK tech chief urges pension funds to back AI startups

Britain’s Technology Secretary Liz Kendall has made a fresh push to redirect institutional capital into the country’s tech sector, promising legal changes to pension fund rules. Speaking to Bloomberg TV during London Tech Week, Kendall said the government would pursue reforms aimed at unlocking more investment into UK startups. “I’m sure you’ll see more movement on that very soon,” she said, in an interview recorded before Defence Secretary John Healey’s shock resignation over a funding dispute with the Treasury.

The pension play builds on a voluntary accord struck last year, when 17 major UK pension providers agreed to allocate at least 10% of their defined-contribution default funds to private markets by 2030, with a minimum of 5% earmarked for domestic assets. That commitment is expected to unlock roughly £25 billion for UK businesses. Chancellor Rachel Reeves has not ruled out mandating the allocation. In April, she secured parliamentary authority to force pension funds to invest a proportion of their assets domestically, after the House of Lords dropped its opposition in exchange for government concessions.

Kendall framed the strategy as part of a broader shift toward what she called a “more active, more muscular government that takes bets on where we think Britain is great.” She argued the country must become an “indispensable partner” in the global tech architecture to gain greater control over AI. The rhetoric was backed by spending commitments unveiled earlier in the week. Kendall announced a £1.1 billion AI hardware plan, including £400 million for chip procurement and £150 million earmarked for buying next-generation inference chips from British firms this summer.

Despite these domestic ambitions, American companies have been the biggest beneficiaries of the UK’s AI push so far. Anthropic won a contract to build an AI-powered assistant for GOV. UK, while Palantir Technologies secured a £240.6 million Ministry of Defence analytics deal in January. The reliance on foreign firms has triggered a political backlash. British lawmakers this month called for breaking Palantir’s £330 million NHS contract, citing data sovereignty concerns. The government is now reviewing whether to walk away from the deal when a break clause arrives in 2027.

The pledges landed during a London Tech Week that saw AMD commit up to £2 billion over five years and cloud provider Nebius pledge roughly £1.7 billion for UK AI infrastructure. But critics note that most of that capacity still runs on American hardware. That tension sits at the heart of Britain’s AI strategy. Efforts like the Cosine-led Lumen Sovereign project, which aims to build the country’s first homegrown frontier AI model, are still in early stages. Meanwhile, Palantir faces growing resistance across Europe, with Germany’s military recently excluding it from a defence cloud procurement.

Kendall’s claim that the government will pursue “legal reforms” to pension fund rules remains vague, with no timeline or specific legislative vehicle named. The 5% domestic investment pledge from pension providers is voluntary, and compliance is not yet measurable. While Reeves now holds the power to mandate domestic allocation, she has repeatedly said she does not expect to use it. The £1.1 billion hardware plan is spread across multiple programmes and years, making the headline figure less dramatic than it appears. And though the government frames its chip procurement as supporting British firms, the country’s most prominent chipmakers, Graphcore and Alphawave IP, have already been acquired by foreign buyers.