Welcome to the Atticus Partners Technology newsletter: the Bytesize Briefing! Each month we cover politics and policy from across the UK and European technology sectors.
In this May edition, we look at the launch of the Sovereign AI Fund, financial backing for the drone sector, the expansion of the Digital Markets Act, and more.
For more information about Atticus’ work in the technology sector, or questions about the support we could offer you, please get in touch via tech@atticuscomms.com.
UK launches £500mn sovereign AI fund to scale domestic AI industry
The UK government has unveiled a £500 million Sovereign AI Unit designed to accelerate the growth of domestic artificial intelligence firms and strengthen the country’s global competitiveness in the sector. Announced by Secretary of State for Science, Technology and Innovation Liz Kendall MP, the fund will operate as a government-backed venture capital vehicle investing directly in UK AI companies.
In addition to financial support, Sovereign AI will provide firms with access to national AI supercomputing infrastructure, R&D resources, and guidance on regulatory and procurement pathways. The initiative is intended to help high-potential startups overcome the “scale-up gap” that often prevents them from transitioning into large commercial players.
The government highlighted the rapid growth of the UK AI sector, noting strong venture capital inflows in 2025 and early 2026, but argued that more targeted state support is needed to translate research strength into industrial leadership.
Kendall is expected to describe AI as central to both economic growth and national security, framing the fund as a key long-term investment in Britain’s technological future. The first recipient companies are also expected to be announced at the launch event hosted by AI firm Wayve.
The initiative reflects a broader shift towards active state participation in strategic technology markets, combining public investment with infrastructure access and regulatory engagement to support domestic AI scale-up.
Government gives major financial backing to drone sector
The UK government has announced a significant investment of £46.5 million to accelerate the development of the drone and advanced air mobility sector. This funding is designed to modernise British airspace, with the ambitious goal of seeing electric flying taxis in regular use by 2028. Beyond passenger transport, the investment aims to enhance public services, including medical logistics, emergency response, and infrastructure inspections.
A major portion of this funding, approximately £20.5 million, is dedicated to security and public safety. The government plans to develop a first-of-its-kind drone identification system, essentially creating a digital number plate for the skies. This technology, known as Hybrid Remote ID, will broadcast a drone’s identity and location in real-time. By providing law enforcement with the tools to track and identify operators, the government hopes to crack down on illegal or suspicious drone activity while building public confidence in legitimate commercial operations.
The remaining £26.5 million will be used to reduce administrative hurdles and streamline the regulatory environment. Managed through the Civil Aviation Authority, these funds will help create a faster, digital application process for drone operators. By cutting red tape, the government intends to make it easier for businesses to integrate drone technology into everyday services, such as delivering urgent medical samples or monitoring vital infrastructure.
Ministers believe that by positioning the UK as a leader in aviation innovation, the sector could contribute over £100 billion to the economy by 2050. This initiative is part of a broader strategy to support high-growth industries like robotics and artificial intelligence. Overall, the funding represents a dual commitment to economic growth and national security, ensuring that the next generation of flight is both commercially viable and strictly regulated to protect the public.
Europe’s AI Rulebook Faces Pushback and Britain Could Be a Beneficiary
This week some of Europe’s largest technology companies wrote an opinion piece asking for Europe to loosen artificial intelligence regulation, arguing that the continent’s current rulebook is undermining innovation just as the global AI race enters its next phase.
On the 5th May, the chief executives of seven of Europe’s most influential technology companies, including ASML, Airbus, Ericsson, Nokia, SAP, Siemens, and Mistral AI, published a joint appeal calling for the EU’s AI regulations to be “reduced and simplified”. This call comes as the European Commission prepares to reopen discussions on implementation of the bloc’s 2024 AI Act, alongside a broader “Tech Sovereignty Package” expected later this month, which will include support for semiconductor manufacturing and AI infrastructure.
The argument put forward by these influential tech giants is that Europe is losing time. More than three years after the launch of ChatGPT ignited the generative AI race, they argue that the region remains focused on regulation while competitors in the US and Asia have shifted toward scaling AI in robotics, infrastructure and industrial systems. The group also called for stronger industrial policy and more flexible merger rules, saying fragmented markets and subsidised international rivals are making it harder for European firms to compete globally.
For the UK, this development matters because Westminster cannot ignore the direction of travel in Brussels. The UK remains deeply integrated with European telecoms, software and semiconductor supply chains. Decisions made by the EU on AI governance often shape product design, compliance standards, and investment flows across the continent. Britain’s deliberate lighter-touch approach to AI regulation compared with the EU’s more prescriptive framework could make the UK increasingly attractive to AI startups, hyperscalers and enterprise software companies. London, Cambridge and Manchester already have growing AI clusters, and if European firms feel constrained by Brussels, the UK could attract additional talent, venture funding and R&D activity.
However, a widening regulatory gap between the UK and EU could create compliance friction for British firms selling into Europe. UK startups may enjoy greater flexibility at home, but if they want access to Europe’s vast enterprise market, they may still need to build products around EU standards.
Overall, this shows that Europe’s tech leaders are no longer debating whether AI matters, they are debating whether regulation is slowing them down. For the UK, that could open a rare strategic window for the country to position itself as Europe’s most commercially attractive AI market, provided it can balance speed, safety and global interoperability.
The DMA expands again
The European Commission is preparing to expand the practical reach of its landmark Digital Markets Act (DMA), with cloud computing and artificial intelligence now emerging as the next major enforcement frontiers. After more than a year of implementation, regulators argue the legislation has already improved competition in digital markets by making it easier for users to switch services, transfer data, and access interoperable platforms. The next challenge is ensuring those same principles apply to the fast-growing infrastructure layers of the digital economy.
The DMA currently applies to designated “gatekeepers” including Alphabet, Amazon, Apple, Meta, Microsoft and ByteDance, requiring them to avoid anti-competitive behaviour and open access to competitors. According to the Commission, these obligations have created fairer conditions for both consumers and smaller businesses, particularly by reducing switching costs and limiting ecosystem lock-in.
EU competition chief Teresa Ribera has now signalled that the same regulatory logic should apply to AI and cloud services, describing the DMA as “future-proof” and capable of adapting to emerging market concentration. Investigations are already underway into whether Amazon and Microsoft should be formally designated as gatekeepers for their cloud computing services, while regulators are also considering whether certain AI assistants should qualify as core platform services under the law.
This marks an important policy shift. Rather than focusing solely on consumer-facing platforms such as app stores and search engines, Brussels is turning its attention to backend digital infrastructure, where dependency is often harder to detect but equally powerful. Cloud providers and AI platforms increasingly shape who can compete in software development, enterprise services and digital innovation. While Apple has warned that stricter rules may undermine privacy, security and innovation, consumer groups such as BEUC are pushing for even stronger enforcement.
Looking Ahead...
Looking ahead, the current turmoil in the British political environment has the potential to impact key pieces of tech legislation progressing through Parliament, including the Cyber Security and Resilience (Network and Information Systems) Bill. With this piece of legislation awaiting the announcement of Report Stage date, it is yet to be seen how fallout from the 7th May local elections – and potential reshuffle – impacts the timely progression of the bill.
Elsewhere, with the European Union negotiating its 2028-2034 budget, all eyes will be on how much the bloc allocates towards digital. The EU has long been considered a leader in digital regulation, thanks to landmark pieces of legislation like the Digital Markets Act and Digital Services Act, and so as discussions progress, the tech world will be hoping for an ambition funding commitment to match.
To find out more about how Atticus helps tech companies to navigate the changing regulatory and legislative landscape, get in touch with our team at tech@atticuscomms.com to learn more about what we can do for you.