UK technology ministers are briefing against government plans to adopt EU regulations, arguing that it could restrict the growth of Britain’s tech and AI sector.
The plan, leaked to media outlets in April, is aimed at fostering a de facto single market between the UK and EU, and would see the UK Government introduce legislation that would enable it to adopt EU laws without gaining full parliamentary approval.
Yet ministers working within the Department for Science, Innovation and Technology (DSIT) have told the FT that they’re especially concerned the UK will end up adopting the EU’s AI regulations.
“Our more laissez-faire approach is seen to have attracted investment for our companies and given them freedom to operate,” one unnamed source said.
Fearing sovereign AI mandates and the loss of opt-outs
One other concern is that, if the UK aligns with EU law, it will move the country further away from the US, while depriving the UK of the ability to make pro-US exceptions to its 2% digital services tax.
“We need opt-outs, which are tough in these negotiations,” explained the unnamed source. “Plus the US has thrown their […] investment and bases at us for the same freedom.”
The DSIT sources are voicing their concerns at a time when the Trump administration has threatened the UK with retaliatory tariffs if it continues to levy its digital services tax, which applies to any digital platform (e.g. social network, search engine, or online marketplace) that generates more than £500 million ($675.5 million) in annual worldwide revenues.
It raised £944 million ($1.275 billion) in the 2025-26 fiscal year, marking a 17% annual increase, yet President Donald Trump has argued that it unfairly penalizes the United States.
“They think they’re going to make an easy buck, that’s why they’ve all taken advantage of our country,” he said on April 23 at an Oval Office press conference.
A related concern is that an EU-aligned UK would be required to comply with the bloc’s ‘Made in Europe’ agenda, which stipulates that public tenders and contracts must be awarded to companies that meet local-content standards (which vary by sector).
In particular, they fear that the UK may be forced to emulate the behavior of EU member states such as France, which has recently prohibited its public sector from using Microsoft and Zoom software.
However, a key element of the Made in Europe agenda is the Industrial Accelerator Act, which in its current form actually excludes “digital technologies, artificial intelligence, quantum
technologies and semiconductors” from its list of strategic sectors.
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EU moving to amend ‘disaster’ approach to AI regulation
Regardless of how well-informed (or not) the ministers are, the UK tech and AI sectors have been showing encouraging signs of growth in recent years, something which may or may not change in the event of alignment with EU laws.
UK-based companies raised £7.2 billion ($9.78 billion) in Q1 2026, led by AI company Nscale and autonomous driving firm Wayve, with their rounds coming as part of a busy quarter for European tech funding.
Yet the EU’s AI Act, which UK firms could end up having to comply with, has attracted criticism since it came into force in 2024, leading the Union to introduce a suite of Digital Omnibus amendments to some of its measures.
Even with this incoming package of changes, some commentators argue that the UK may disadvantage itself by aligning with the EU’s AI rules.
Speaking to TechRepublic, Richard Windsor — the founder of thinktank Radio Free Mobile and a former researcher for Nomura Securities — suggests that regulations are a big part of the reason why the EU’s AI sector compares unfavorably to its American counterpart.
“A substantial part of the EUs failure to be significant in AI and technology more generally, other than SAP and ASML, is due to its generally hostile regulatory approach,” he said .”The one really big potential win for Europe this year was OpenClaw, but the minute it was clear that it was going to have traction, the founder left Europe and went to the USA.”
Windsor, who has written extensively about the European tech sector, argues that the EU’s approach to AI has been a “disaster” and that the bloc is trying to regulate things that do not really exist yet.
“[EU AI regulation] needs to be softened and softened immediately,” he added. “The problem is that it has now been a year and very very little has happened.”
As of writing, the EU Parliament and EU member states have failed to reach an agreement on the Digital Omnibus measures, with the major bone of contention being whether to provide exemptions to high-risk AI systems integrated into products already covered by pre-existing EU safety legislation.
Negotiations on the Digital Omnibus are due to resume in May.
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