- The Treasury will invest £60 million in the Sovereign AI Fund and another £60m in the R&D Procurement Scheme.
- The procurement scheme is growing from £100 million to £160 million, and the Fund is now at £560 million.
- Rather than giving out grants, the government is acting as a customer, letting companies retain their IP.
Sovereign AI Fund, the UK government’s group that supports domestic AI, is getting another £120 million. Half of that will go into investing in startups, and half will be used to buy from them.
HM Treasury announced this on 24th October as part of a £621 million AI package, just prior to the Chancellor’s Budget on 28th October. For the founders, it’s a direct boost to their company balance sheets.
What the extra £120M buys
The first £60 million will boost the Sovereign AI Fund, enabling direct investments in UK AI companies and helping them grow. The Fund is now also focused on physical and industrial AI, including robotics, autonomous systems, and advanced manufacturing.
This is a 12% increase on the £500 million reported at the Fund’s April launch. The Fund’s first investment, Callosum, closed its $100 million seed round in August, which is more than this new top-up.
The remaining £60 million will go into the Sovereign AI R&D Procurement Scheme, which is looking at health, care and ‘AI security, assurance and safe adoption’. The scheme launched on 31st August with £100 million, and with the additional funding now announced, it’s at £160 million.
The way the scheme operates is key. The government is acting as an early customer rather than just a grant funder. Firms build the technology at the demonstrator stage, and departments then trial it in the real world. If they succeed, firms keep their IP. Upfront payments can be required. The aim is to remove barriers of turnover and track record so smaller companies can compete with bigger ones.
Who is already inside
Basecamp Research is an example of a company in the Fund’s portfolio. In 2019, two PhDs described what they called the first off-grid DNA sequencing on the Vatnajökull ice cap in Iceland. Basecamp Research is both an investee of the Sovereign AI Fund and a named partner in the government’s new £100 million AI Biosecurity Lab.
Basecamp was founded in 2019 by CEO Glen Gowers and Oliver Vince. The company develops biological foundation models known as Eden, trained on field-collected genetic data and used for in vivo cell therapy. On 23 September, they announced a $140 million Series C round led by S32.
The scheme is geared towards a very different type of company. Advai, a London-based company, tests and monitors AI for defence, government and financial services customers. The scheme is squarely focused on agent security, with several startups directly addressing the challenge.
For hardware, the package allocates £18M for a UK Advanced Chip Design Academy. Tech Funding News has previously covered UK design startups such as ChipFlow and Tattvam AI.
The rest of the £621M, and the questions it leaves
Security is by far the largest area at £415 million: £165 million for the National AI Biosecurity Initiative, £120 million for the AI Security Institute, £70 million for the National Exposure and Real-Time Vulnerability (NERV) Centre, and £60 million for the National Cyber Shield.
Home-grown capability is £138 million. Growth is £68 million: £15 million for the AI Challenge Prize, £23 million over three years for the AI Economics Institute and £30 million for local AI partnerships. Edinburgh chip design and the NCSC AI Cyber Security Centre of Excellence in Manchester don’t have a price tag.
The £100 million biosecurity lab will also receive up to £200 million in AI model credits from OpenAI and Anthropic and will have partnerships with Google DeepMind and Basecamp.
There are two primary issues with the Sovereign AI funding. The first is overlap. The government is both an investor in Basecamp via the Fund and a lab partner via Treasury. Anthropic is both a credit provider to the lab and a Basecamp investor via the Anthology Fund. TFN’s earlier piece on Cosine pointed to an alternative path: a UK-based startup training a model on UK infrastructure so the most sensitive work stays in the UK.
Scale is still a big challenge. European AI startups raised $23B in the first half of 2026, about 7% of what US startups raised, according to Crunchbase and HumanX data reported by TFN in August. The £120M top-up won’t close this gap, but it can affect which UK startups get early state customers and funding.
The first review will happen on October 28, when the Budget is announced.
