US halts £31 billion UK tech prosperity deal over digital tax and farming standards

The United States government has put its "tech prosperity deal" with the United Kingdom on hold, citing the UK's lack of progress in lowering trade barriers in other areas. The deal has a total value of around £31 billion, including a £22 billion investment from Microsoft and £5 billion from Google.

The core of the deal would see the creation of an artificial intelligence (AI) growth zone in the north-east of England, which UK officials say could bring in up to £30 billion and create 5,000 jobs. Under the agreement reached by both countries previously, the deal would only become "operative alongside substantive progress being made to formalize and implement" it.

The decision by the US is caused by three big sticking points. First, there is the Digital Services Tax (DST) that the UK government levies on companies including US Big Tech. It is a 2% tax that raises around £800 million per year. Second are the UK's food safety rules; the UK bars the export of certain US agricultural products such as chlorine-washed chicken or hormone-treated beef. Finally, the US is not pleased about online safety rules that the UK has introduced because they put a greater burden on Big Tech to ensure a safe environment for children online.

Prime Minister Keir Starmer has so far resisted pressure from the US to scrap or amend the DST and has stood by a manifesto pledge not to weaken farming standards.

“Our 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,” a UK government spokesperson said about the matter.

The deal has been celebrated by PM Starmer, who called it "a generational stepchange in our relationship with the US". The agreement was good news for the UK which was hit by the Trump tariffs, albeit nowhere near as badly as many other countries. UK Business and Trade Secretary Peter Kyle and US officials held meetings last week to talk about various tariffs and critical minerals, with talks expected to carry on next month. This AI issue will no doubt be on the agenda if it is still not resolved.

Source: The New York Times via The Guardian