The UK may be forced to choose between China and the US if it wants to fund AI advancement
The UK government may be forced to make a choice between the US and China economically if it wants investment to fund the infrastructure needed for AI advancement, say leading audit, tax and business advisory firm, Blick Rothenberg.
Winnie Cao, head of China desk at the firm said: “Keir Starmer, the UK prime minister is seeking to expand the UK’s use of AI, as stated in his ‘AI Opportunities Action Plan’ announced in January. But the UK needs funds to build the infrastructure needed for AI adoption, and Chinese investment in the sector could help speed up the process.”
She added: “Currently, the UK government is trying to remain neutral in the tit-for-tat trade tariff fight between America and China. However, the US president Donald Trump has hinted he could put tariffs on UK goods, while suggesting a deal could be ‘worked out’ with the UK. It is not a wild guess to say this ‘deal’ could hinge on whether the UK continues to work economically with China.”
Winnie said: “With America becoming a less welcome place for foreign direct investment (FDI), especially from China, the UK could act as an investment destination for Chinese businesses.
“We cannot shy away from the fact that China is developing leading technologies in many areas. DeepSeek has rattled the international AI market, with Donald Trump describing it as a “wake-up call” for US companies.”
She added: “The UK may have a ‘special relationship’ with the US. However, the UK needs to think about investing similar level of focus and attention on the world’s second largest economy. Donald Trump’s tariffs will significantly impact the US economy and diplomatic relations, reducing the funds available for investment overseas. It will also be harder for the US to access the materials needed for their own AI advancement, as currently China is one of the world’s largest producers of semiconductor chips.”
Winnie said: “However, the UK is not doing itself a favour with the current overall business tax regime, and the latest non-dom rule abolishment has already pushed away innovative entrepreneurs and high-net-worth investors, who are starting to leave the country before the new rules enact on 6 April 2025 to less punitive tax regimes elsewhere.”
She added: “Although the government has announced a more ‘generous’ Temporary Repatriation Facility in relation to a non-dom’s foreign income and gains during the transitional period, they have yet to share details of this. The Spring Statement in late March will provide a final chance to pause and review these changes, and to offer international investors and entrepreneurs a more compelling reason to come to and remain in the UK.”