The UK’s got a growth problem. And Labour’s betting big that AI and deregulation can fix it.
Peter Kyle, the business secretary, isn’t staying silent. The UK needs to “innovate its way out” of what he’s calling a growth emergency. His pitch? Use technology to escape the dreaded cycle of high taxes and low growth. It’s a bold move—cutting red tape with one hand while throwing money at R&D with the other. Whether it works? That’s the £86bn question.
Why the UK Is Going All-In on Tech-Led Growth
Here’s the situation: Labour inherited an economy stuck in neutral. Growth is sluggish, taxes are high, and businesses are drowning in paperwork.
Kyle’s diagnosis is simple. “I’ve never known a company… get its way out of financial crisis without innovating its way out,” he told UK AI leaders recently. So the government’s doubling down on two strategies: slash bureaucracy and turbocharge AI adoption.
The goal isn’t subtle. They want to “shock” the economy into action. Think of it as economic defibrillation, but with algorithms.
Cutting the Red Tape: £1bn in Deregulation
First up: making life easier for small businesses.
Labour’s pledged to deliver £1bn worth of deregulation by the next election. They’ve already banked £233m in savings this year by simplifying corporate reporting—things like ditching unnecessary strategic reports and directors’ reports.
Kyle claims this saves businesses about 200 hours of work each. That’s five full weeks someone can spend actually running their company instead of filling out forms. For the South East, which has the UK’s highest concentration of SMEs, this could be a genuine lifeline.
The theory? Free up entrepreneurs to focus on what matters: building teams, growing revenue, and not losing their minds to compliance paperwork.
Throwing Money at Innovation: £86bn for R&D
Deregulation’s great, but Labour’s also opening the wallet.
The government just bumped its R&D budget by 11%, bringing total spending over the review period to £86bn. And where’s that money going? AI is “front and centre,” according to Kyle.
They’re not just funding research, they’re betting AI itself will solve the skills gap. Kyle argues that a two-hour AI training session can help a 55-year-old close the productivity gap with a 35-year-old who’s been using the tech twice as much.
Bold claim? Absolutely. But if AI can genuinely accelerate workforce upskilling, it becomes both the solution and the tool for implementation. That’s either brilliant or wishful thinking—time will tell.
Making It Work: Integration Is Everything
Here’s the catch: innovation means nothing if it stays in the lab.
Kyle’s pushing for better coordination between where innovations are created (universities, research labs) and where they scale up (actual businesses). “It needs to be much more fluid,” he said.
The plan involves:
- Getting local mayors and regional leaders involved in investment decisions
- Pushing universities to take a more active role in commercialising research
- Creating smoother pathways from lab to market
Kenny MacAulay, CEO of Acting Office, summed it up: “By pursuing an agenda of deregulation and a technology-first approach, the government will be able to turbocharge the next generation.”
Translation: get innovation out of ivory towers and into the real economy, fast.
The Verdict: High-Risk, High-Reward
Labour’s making a massive bet that technology—especially AI—can pull the UK out of its growth slump.
The strategy is aggressive: cut bureaucracy, pump money into R&D, and pray that AI adoption spreads fast enough to make a difference. It’s a high-tempo approach that marks a clear break from previous governments.
Will it work? That depends on whether businesses actually use their newfound freedom to innovate, whether £86bn creates breakthrough tech, and whether AI lives up to its productivity promises.
As Lee Beard from Check Point Software notes, “AI is a powerful catalyst for innovation… and it’s encouraging to see this recognised at the highest levels of UK leadership.”
One thing’s certain: we’re about to find out if you can actually shock an economy back to health.
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FAQ: Labour’s AI Growth Strategy
Q1: What exactly is Labour’s growth strategy?
A: Labour’s using a two-pronged approach: aggressive deregulation to cut £1bn in red tape, plus an 11% increase in R&D spending (totalling £86bn) focused heavily on AI. The goal is to free up businesses while simultaneously pushing tech-driven innovation.
Q2: How will deregulation actually help small businesses?
A: The government claims simplifying corporate reporting will save each business around 200 hours annually. That’s time owners can redirect toward growth activities like hiring, sales, and strategy instead of compliance paperwork.
Q3: Can AI really close the skills gap that quickly?
A: Kyle argues that AI tools can accelerate learning dramatically—claiming a two-hour training session could help older workers match younger colleagues’ productivity. While ambitious, AI-powered learning tools are showing promise in corporate training environments.
Q4: What’s the biggest risk with this strategy?
A: The plan assumes businesses will actually use deregulation to innovate and that AI adoption will happen fast enough to move the needle. If companies pocket the savings without investing in growth, or if AI uptake is slow, the strategy could fall flat.
Q5: When will we know if it’s working?
A: Labour’s targeting the next election for its £1bn deregulation goal. Real economic indicators—GDP growth, productivity metrics, and business investment figures—should start showing movement within 18-24 months if the strategy’s gaining traction.
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Effective Date: 15th July 2025
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