UK adds £120M for Sovereign AI Fund to invest in and buy from startups

The UK Treasury is adding £120 million to its Sovereign AI push, splitting the money evenly between the Sovereign AI Fund and the Sovereign AI R&D Procurement Scheme. That takes the Fund to £560 million and lifts the procurement scheme from £100 million to £160 million. HM Treasury announced the package on 24 October as part of a wider £621 million AI plan, just days before the Chancellor’s Budget on 28 October.

The money is doing two different jobs. One half is meant for direct investment in UK AI startups, while the other half is for buying technology from them. That procurement piece is the unusual part: the government wants to act like an early customer, not just a grant giver. Companies build at the demonstrator stage, departments test the tools in real settings, and if the work sticks, the firms keep their intellectual property. Upfront payments can be used too.

The Fund is also broadening its brief. Alongside AI software, it is now focused on physical and industrial AI, including robotics, autonomous systems and advanced manufacturing. The new £60 million is a 12% increase on the £500 million figure reported at launch in April. Its first investment was Callosum, which closed a $100 million seed round in August.

The procurement scheme is aimed at health, care, and what the government calls AI security, assurance and safe adoption. It is meant to help smaller companies get through the door by removing barriers like turnover requirements and track record. Basecamp Research already sits inside the Fund’s portfolio, and it is also a named partner in the government’s new £100 million AI Biosecurity Lab. Advai, meanwhile, shows the kind of company the scheme wants: a London startup testing and monitoring AI for defence, government and financial services.

The broader package is heavily tilted toward security, with £415 million in that area alone. Another £138 million goes to home-grown capability, £68 million to growth, and £18 million to a UK Advanced Chip Design Academy. But the bigger issue is still scale. European AI startups raised $23 billion in the first half of 2026, and this £120 million top-up does not change that gap. It can, though, decide which UK startups get the state as their first serious customer.