The 2025 Autumn Budget sets out a package of measures that UK chancellor Rachel Reeves says will underpin the country’s ambitions in artificial intelligence (AI), automation and advanced manufacturing, combining major investment in compute infrastructure and innovation funding with changes to capital allowances and new skills programmes.
A central pillar of the Budget is long-term investment in AI compute. The government plans to invest up to £2bn in the public sector compute ecosystem over the forecast period, including more than £1bn to expand the AI Research Resource by a factor of 20 by 2030, and up to £750m for a new national supercomputer to be hosted at the Edinburgh Parallel Computing Centre.
Ministers also highlighted private-sector commitments, including a partnership with Microsoft and Nscale to build what is described as the UK’s largest supercomputer, and the ‘Stargate UK’ initiative with OpenAI, NVIDIA and Nscale to deliver large-scale AI datacentre infrastructure in the North East. These investments will sit within a network of AI Growth Zones, intended to attract data-intensive businesses and research clusters.
Reeves framed AI as part of a wider industrial push, saying the government was “proud of our industrial heritage” and “determined to build the industry of the future… so that we buy, make and sell more here in Britain – for steel, for shipbuilding, and today for AI, driving innovation and building that great industry here in Britain”.
For robotics and automation suppliers, the measures are framed as a foundation for scaling AI-enabled systems in sectors such as logistics, manufacturing and utilities. The government argues that more accessible compute will accelerate the development of tools such as computer vision, digital twins and optimisation algorithms that underpin many advanced automation projects.
James Clark, partner at law firm Spencer West, said there are “definitely nuggets in there to cheer tech enthusiasts”, pointing to Growth Zones, public compute, an AI for Science strategy and UKRI funding for innovative firms.
However, he cautioned that the UK is competing with “bigger markets… pouring public and private funding into technology – and particularly AI – at a level that far outstrips the relatively modest commitments in the UK Budget”, noting that each AI Growth Zone will be backed by just £5m of government investment. He also warned that tax changes affecting dividends and capital gains could weigh on tech start-ups and scale-ups.
Industrial Strategy, National Wealth Fund and DRIVE35
The Budget places robotics and automation firmly within a broader modern industrial strategy centred on eight priority sectors, including advanced manufacturing, clean energy, digital and technologies, and culture and creative industries. UK Research and Innovation will be asked to channel around £9bn over four years into these ‘IS-8’ sectors, with about £4.5bn expected to flow directly to innovative firms.
The National Wealth Fund, which aims to crowd in private capital into strategic industries, will have up to £27.8bn of capital, having already committed around £3.8bn and mobilised a reported £5.3bn in private investment.
The fund’s mandate covers clean energy, advanced manufacturing, digital and tech, and transport, with ministers positioning it as a vehicle to support large, capital-intensive projects such as gigafactories, robotics-enabled industrial plants and low-carbon transport infrastructure.
In automotive, the Budget extends the DRIVE35 programme with an additional £1.5bn of funding to 2035, taking total support to £4bn over the next decade. DRIVE35 is intended to bolster UK capability in next-generation zero-emission technologies, which in practice includes powertrain electrification, battery manufacturing and associated automation and testing lines.
Capital allowances, certainty and workplace autonomy
On tax, the chancellor is reforming capital allowances from April 2026. Main rate plant and machinery expenditure will qualify for a 40% first-year allowance, with the remaining balance written down at 14% on a reducing-balance basis, replacing the current 18% main rate writing down allowance.
For robotics and automation end-users, the shift could alter investment calculations for large automation programmes, particularly where spending falls outside the scope of full expensing or the Annual Investment Allowance. The Treasury argues that the package maintains a competitive regime while stabilising long-term costs, but some in the automation sector were looking for more.
Oana Jinga, chief commercial and product officer and co-founder at Dexory, said UK innovators “don’t need more short-term tweaks, they need rules they can actually plan around”. She argued that a multi-year guarantee on R&D reliefs would see “robotics and AI projects move from pilot to production overnight”, and described the Budget as having made productivity a central theme without giving businesses the certainty required “to make that productivity a reality”.
She also questioned whether existing capital incentives are aligned with modern industrial assets. “Right now, full expensing ignores the equipment that actually powers modern industry. Warehouses run on robotics, sensors, heavy compute and certified second-hand equipment, yet none of this was addressed or expanded in today’s announcements,” she said, calling this a missed opportunity to support technologies most likely to accelerate productivity.
Beyond tax, Jinga highlighted the need for clearer regulatory pathways around autonomy. She said that “clear, usable rules for workplace autonomy would have an immediate impact”, suggesting that a single, joined-up sandbox for approvals “would cut through months of uncertainty and let firms deploy autonomous mobile robots at scale”.
R&D programmes and missions
The Budget also confirms that total public R&D spending is set to rise to £22.6bn a year by 2029-30, with an emphasis on applied research and commercialisation.
A new £130m Growth Catalyst programme will support innovative SMEs, including those in robotics and automation, with flexible funding to help them scale. The government is also creating a £500m R&D Missions Accelerator aimed at delivering a 10% reduction in the cost of major public infrastructure projects, partly by using advanced digital tools, automation and AI-driven design and delivery methods.
These initiatives sit alongside a “metascience and AI for science” strategy, worth £137m over four years, designed to experiment with new research models and apply AI to scientific discovery. For robotics and automation suppliers, this may translate into increased demand for lab automation, high-throughput experimentation platforms and autonomous test facilities.
Skills, workforce and SME adoption
On workforce, the Budget sets out an engineering skills package and a TechFirst programme to boost digital and technology skills, alongside reforms to the growth and skills levy intended to make it easier for employers to fund short, modular training. New Technical Excellence Colleges will focus on advanced manufacturing, clean energy, digital and tech, and defence.
Reeves confirmed that “training for under-25 apprenticeships [will be] completely free for small and medium sized enterprises”, part of a wider Youth Guarantee that aims to give young people “a place in college, an apprenticeship or personalised job support”.
Mark Gray, UK and Ireland country manager at Universal Robots, said the Budget “acknowledges the cost pressures on small and medium sized businesses” and welcomed free training for under-25s in SMEs, arguing that skills are essential to resilience and growth.
“As UK manufacturers continue to face immense challenges with the rising costs of resources and widening skills gaps, these reforms are a lifeline for many,” he said. He added that as industry accelerates automation and adoption of new technologies, “it’s more important than ever that the next generation is equipped with technical skills and the confidence to drive future growth in the industry”.
Jinga also pointed to mid-career technicians as a critical but under-served group for robotics adoption. She argued that “mid-career technicians should be able to retrain into robotics and AI roles in a matter of months”, and that there was “little in the Budget to accelerate technical retraining”, despite its importance for reducing reliance on overseas hiring and speeding up deployment.
Robotics integrators and end-users have long highlighted access to mechatronics, controls and data talent as a key growth constraint, and will now be watching how the new skills schemes and SME training offers are implemented locally.
Procurement, regulation and the role of the state as customer
Beyond funding and tax, Jinga suggested that government procurement could be a far more powerful lever for automation. If public services “from NHS logistics to postal networks” committed to multi-year automation goals, she said, it would create the reference deployments needed to help UK robotics scale domestically and compete globally. “That kind of long-term signal was missing today, but would align closely with the government’s ambition to raise productivity,” she added.
Reeves herself underlined that the state intends to deploy automation, not just fund it, saying she would realise savings “through AI and automation” as part of an expanded efficiency drive across government. She said public-sector efficiency gains should “be required across government”, with savings in areas such as the NHS reinvested into frontline care.
James Clark similarly noted that capital investment in NHS and HMRC technology infrastructure is welcome, but argued that the overall scale of UK public investment still lags behind that of the USA, China and the EU, all of which are “pouring public and private funding into technology – and particularly AI – at a level that far outstrips” UK commitments. Changes to dividend taxation and capital gains reliefs, he warned, could further shape founder and investor behaviour in the tech ecosystem.
Regulatory and tax changes affecting digital and automation
Alongside the core innovation measures, the chancellor announced steps to modernise tax administration and regulation, including progress towards mandatory e-invoicing for large businesses and further digitalisation of HMRC systems. For automation suppliers focused on back-office and financial process automation, these changes are likely to standardise data formats and increase demand for integrated software-robotics solutions that connect ERP, tax and compliance workflows.
Taken together, Budget 2025 offers a mixed picture for the automation community: significant long-term commitments on AI compute, industrial strategy and skills, but limited movement on the specific capital incentives and regulatory certainty that many robotics firms say they need to move faster. Suppliers and end-users will now be assessing how far the announced programmes – and the gaps identified by industry voices – can be translated into bankable automation projects on factory floors, in warehouses and across public services.
