UK-US tech talks put digital regulatory powers under scrutiny

Negotiations over the UK-US Tech Prosperity Deal have partially resumed, but disputes over the UK’s Digital Services Tax and online safety rules remain unresolved. The US has threatened 100% tariffs on countries introducing digital taxes. The proposed partnership covered nuclear energy, quantum technologies, joint AI research, infrastructure exports and standards. Microsoft, Nvidia, OpenAI, Google and CoreWeave announced a combined £31 billion of investment alongside it, mostly for AI infrastructure, but investment pledges linked to the deal have since been abandoned.

Prime Minister Andy Burnham’s government has signaled willingness to discuss the Digital Services Tax, prompting civil society concerns that regulatory powers could become bargaining chips. The levy is a 2% tax on relevant revenues from UK users, applying only to firms with revenues exceeding £500 million globally and £25 million from UK users. Washington also objects to the Online Safety Act, arguing that it risks censorship and disproportionately affects large American companies.

A Trade Justice Movement report warns that US-backed digital trade provisions could constrain mandatory AI rules, online safety enforcement, competition regulation and personal data protections. Non-discrimination clauses could expose rules targeting the largest platforms to challenges because those companies are predominantly US-based. Continued reliance on American providers for critical infrastructure and public services complicates Britain’s ambitions for greater technological sovereignty, while public opposition to data center expansion challenges its infrastructure-led strategy.