Rachel Reeves has finished delivering her spending review to Parliament, though two topics seem to have garnered the majority of attention in the fintech industry: artificial intelligence (AI) and housing.
With the last Spending Review taking place in October 2021, many were eager to hear what the Chancellor of the Exchequer had to say. Three main pillars were set out as Reeves explained the government was going to invest in Britain’s security, health and economy. She also detailed departmental budgets for day-to-day spending until 2028-29 and until 2029-30 for capital investment.
However, one of the key takeaways for the fintech industry from the review was the focus on AI. Reeves noted that since the Autumn Review 2024, the government has taken significant steps to drive growth, including growing the AI sector and ramping up AI adoption across the UK through the AI Opportunities Action Plan.
However, to take AI forward another step, she added that the government was allocating £2billion from 2026-27 to 2029-30 to transform the AI sector. “This investment will build the UK’s sovereign AI capabilities, funding at least a 20-fold expansion of the UK’s AI Research Resource and backing UK AI companies to grow and scale through the new UK Sovereign AI Unit.
Reeves added: “The government is funding collaboration between business and the UK’s world-class universities to develop new AI courses, launch new AI fellowships and establish a prestigious new AI talent scholarship to develop the AI skills of the future. The government will also support AI diffusion through a new AI Adoption Fund.”
Response to AI funding
For Greg Hanson, group vice president and head of EMEA North at Informatica, the AI-powered cloud data management platform, developing AI is only one step to becoming a global powerhouse. He notes that the workforce must be able to understand the capabilities of AI for it to truly be successful.
“The £2billion investment in the AI Action Plan has great potential to drive growth in the UK economy, transform the public sector and propel the country to a leading position in the global AI race.
“But the real challenge lies ahead. Getting ahead in AI isn’t solely about acquiring and deploying technology. It’s about cultivating a workforce with deep AI knowledge and skills. If the UK doesn’t have the right skillset, valuable insights will be left undiscovered and productivity gains remain elusive.
“Many organisations are in the early stages of building AI readiness and preparing their data for AI. Moving too quickly, without establishing the right foundations, skills, and culture, could result in long-term setbacks rather than sustainable success.”
Supporting SMEs
In the review, Reeves also revealed that the British Business Bank would have its financial capacity increased to £25.6billion. Responding to the change, Janine Hirt, chief executive of Innovate Finance, the industry body for fintech, said: “Today’s Spending Review offers a clear commitment to growth and innovation across the entire UK economy, and as ever, Britain’s fintech stand ready to play a leading role in supporting this ambition.
“The Chancellor’s announcement on the increased capacity and capabilities of the British Business Bank will help to address underinvestment in British start-up and scale-up fintechs. Innovate Finance has long advocated for increased funding for the British Business Bank’s debt and equity programmes and we welcome this material step up in funding.
“We welcome the re-affirmed commitment to making the UK a global AI superpower. The significant long-term funding commitments announced today will ensure AI adoption and skills development across society and the fintech industry will no doubt play the leading role in diffusing this technology across financial services.
“We call on the government to ensure that sufficient resources are available to tackle fraud and economic crime. In addition to extra police resources and funding for tackling serious and complex fraud announced today, the Home Office must have sufficient funding to build a cross-industry data sharing platform to block and disrupt fraud online as part of its new Fraud Strategy.”
However, Hirt picks up on the omission of the development of fintech stating: “We note that today’s Spending Review does not include funding for financial services and fintech, which is a key priority sector in the upcoming Industrial Strategy. We therefore look forward to further progress and action at the Chancellor’s Mansion House speech in July and in HM Treasury’s Financial Services Growth and Competitiveness Strategy.”
The timing needs to be right
Further exploring the impact the Spending Review will have on small businesses, George Holmes, managing director of Aurora Capital, the business funding platform, discusses the housing investment changes which, according to Reeves, “will be the biggest boost to investment in social and affordable housing in a generation.”
Holmes said: “The Chancellor’s £39billion commitment to affordable housing and investment in regional transport infrastructure are commendable steps towards addressing long-standing regional disparities. Improved connectivity and increased housing availability can stimulate local economies and create new opportunities for small businesses across the UK.
“However, the effectiveness of these investments hinges on their timely implementation. Small businesses need clear timelines and streamlined processes to plan and adapt. Delays or red tape could hinder the potential positive impacts on local enterprises.
“The announced two-thirds increase in funding for the British Business Bank to £25.6billion is a positive development that could make a real difference. Access to finance is still one of the biggest blockers for growing businesses. But money alone isn’t the solution. We need faster, simpler routes to funding for a broader range of businesses, across more sectors and regions.
“For SMEs, the success of this review comes down to delivery. If this government wants to be pro-growth, it must now prove it can get capital, contracts and infrastructure working for the businesses that drive the UK economy.”
Infrastructure must be fixed
Also sharing views on the housing changes, Maria Harris, chair of the Open Property Data Association, the UK’s trade body for companies providing and sharing secure, trustable, and smart property data, added: “Today’s commitment of £39billion to social and affordable housing marks a critical step in addressing the UK’s deepening housing crisis.
“But to make that investment count, the Government must also modernise the digital infrastructure that underpins our housing market. Recent communications from MHCLG reaffirming plans to digitise the home buying and selling process, including better data sharing and digital ID services, are welcome but we must accelerate the process.
“The current property transaction process remains fragmented, slow and prone to failure. It adds cost and uncertainty for consumers and drags on productivity for industry. Digitisation is not a ‘nice to have’ but an essential pillar of a fit-for-purpose, functioning housing market.
“By embedding open standards, smart data and seamless digital handovers between buyers, sellers, agents and conveyancers, we can cut fall-throughs, speed up transactions and build trust. The £39billion must be matched by bold reform. Investing in supply without fixing infrastructure is like building homes on sand.”
