Changing of the guard: What the tech and fintech sectors can expect from the UK's new Labour government

In the Labour Party’s 2024 manifesto, one word stood out more than others: Change. 

Technology is at the heart of Labour’s industrial strategy covering areas such as artificial intelligence, digital infrastructure and innovation in financial services. And while it is still early days for the Labour Government, there are some clear signals about what changes are on the way for the tech and fintech sector. 

Labour has come ready with ideas and expertise in the form of Sir Patrick Vallance as science minister within the Department for Science, Innovation and Technology. He has been quick to declare UK science and technology “open for business”.

Some targeted AI regulation on the horizon?

The UK has taken a light-touch, pro-innovation approach to regulating AI, leaving it to regulators to apply their existing regulatory frameworks to AI.

In its election manifesto Labour promised to introduce binding regulation on the handful of companies developing the "most powerful AI models” and banning the creation of sexually explicit deepfakes. This reference echoes the European Commission’s description of General Purpose AI (GPAI) models that could pose systemic risk (which are subject to significant regulatory requirements under the EU’s AI Act). 

However, those expecting more details in the King's Speech were disappointed, as AI did not make it to the list of announced bills. We’ll need to wait and see if the Labour government will continue the wider guidance-based, sector-by-sector approach to AI regulation (see below comment on AI in the financial services sector).

Regulating emerging technologies

In his pro-innovation regulation of technologies review on digital technologies for the former government, Sir Patrick Vallance suggested prioritising a principles-based and outcomes-based regulation in key sectors such as AI, and advocated greater coordination between regulators, holding them to account by government and parliament for driving innovation and ensuring safety. 

In its election manifesto, Labour proposed establishing a Regulatory Innovation Office to implement this vision and to hold regulators to account. It aims to enhance regulatory processes and facilitate innovation, particularly in the context of rapidly evolving technologies like AI, bringing together existing functions across government to address regulatory challenges and speed up approval timelines.

Even though it is not immediately apparent how broad the RIO’s remit or impact will be, under the new Government both regulation and regulators will be under review. 

⇒ Deeper dive: Where the rubber hits the road…regulatory reforms expected under a new Labour government | Linklaters

Building on the Online Safety Act

Highlighting the significant harm children and young people face online, Labour has promised to build on the Online Safety Act 2023 (OSA) which aims to make the UK the “safest place in the world to be online”. It has pledged to quickly bring forward provisions and “explore further measures to keep everyone safer online, particularly when using social media”. However, it is not clear yet how it plans to do that and what the further measures will be. 

Ofcom has already started consulting on how it will implement the OSA which applies to providers of “user to user services”, “search services” and pornographic content, and more recently on children’s duties by setting out what platforms need to do relation to children accessing their services online.

Labour’s manifesto also promised that executives of online companies flouting the rules would be personally held to account with tough sanctions. It is not clear whether this refers to existing OSA provisions or whether it will introduce personal liability for breaches of the substantive duties. 

Championing the UK’s financial services sector 

In January 2024, the now Chancellor of the Exchequer, Rachel Reeves, pledged that Labour would “unashamedly champion” the UK financial services sector. 

Even though the bulk of Labour’s plans for the sector can be found in its Financing Growth policy paper, in its manifesto Labour promised to create the conditions to support innovation and growth in the sector. This would be achieved through supporting new technology and ensuring a pro-innovation regulatory framework, with consumer protection sitting at the heart of its proposals.

To help tackle fraud, Labour will progress ongoing work to give payment services providers more flexibility to delay suspicious payments. But difficult choices still remain around who should be responsible for reimbursing victims of fraud, with the payments industry calling for tech firms to foot some of the costs. 

Labour will likely push forward existing plans to expand open banking and explore open finance under its wider Smart Data schemes initiative, although the industry will be keen for this to be done in a commercially sustainable way. Meanwhile, as the FCA starts to regulate access to cash, the new government may extend the regulator’s powers so that it can guarantee access to face-to-face banking services in some communities. Labour has also promised to end the state of uncertainty faced by the Buy Now Pay Later sector by introducing new regulation to better protect consumers and provide legal certainty for BNPL providers in the UK. 

On AI in finance, it has pledged to adopt an “agile” approach to regulation that promotes use of the technology to foster growth. 

⇒ Deeper dive: Labour and the future of financial services regulation and enforcement

The outlier: Crypto

2024 was expected to be a landmark year for stablecoin regulation, with the UK advancing to the next stage to bringing cryptoassets within its licensing regime. The previous government was preparing for a more comprehensive “phase 2” of cryptoasset regulation, aimed at establishing new regulated activities for a wider array of cryptoassets. 

But crypto does not appear to be among Labour’s priorities for now. Crypto firms will have to wait for more clarity on how fast the government intends to move forward with the work already done in this area by HM Treasury, the FCA and Bank of England. 

Labour has, however, indicated its support of the work already underway on the Digital Pound and has pledged to work with regulators to regulate and oversee securities tokenisation.

Boosting digital infrastructure and climate tech 

In its manifesto the Labour promised to “update national planning policy to ensure the planning system meets the needs of a modern economy, making it easier to build laboratories, digital infrastructure, and gigafactories”. It has also pledged to “make a renewed push to fulfil the ambition of full gigabit and national 5G coverage by 2030”.

Data centres are critical digital infrastructure for the development of AI technologies, but data centre operators have had a hard time navigating the challenges in securing access to the resources they need to operate their data centres efficiently. 

Labour has promised to remove planning barriers to new data centres to ensure UK’s industrial strategy supports the development of the AI sector. And Rachel Reeves’ has already announced that the new deputy prime minister is to reopen and reassess the planning approval process for two hyperscale data centres where planning was refused by local authorities. 

The Kings Speech announced a Planning and Infrastructure Bill which aims to streamline the delivery process for critical infrastructure more generally. This goes along with Labour’s net zero agenda embodied in its clean power mission, which aims to “double onshore wind, triple solar power, and quadruple offshore wind by 2030”  

⇒ Deeper dive: UK: King’s Speech 2024: Bills most relevant to the green and net zero agenda | Linklaters 

AI and workers in the digital economy

When it comes to AI in the workforce, Labour has specific plans to ensure rights and protections keep pace with technological change, safeguarding against discrimination. We expect them to examine what AI and new technologies mean for work, jobs and skills. 

They hope to promote best practice in safeguarding against invasion of privacy through surveillance technology, spyware and discriminatory algorithmic decision making. The introduction of surveillance technologies in the workplace would be subject to consultation and agreement with trade unions or elected staff representatives.

⇒ Deeper dive: Podcast: Labour’s employment law reforms | EmploymentLinks | Linklaters

The DEI landscape – an area many tech companies are working to improve on – also looks set to experience a shake-up.

⇒ Deeper dive: A Labour government: a new dawn for DEI? | The Diversity Faculty Blog | Linklaters

National security and foreign investment n technology

In May 2023, Rachel Reeves concluded her “Securonomics” speech by stating that “from security, comes hope”. National security was a key priority in Labour’s manifesto and investors and companies could see a different approach taken under the UK's National Security and Investment Act. 

Labour will likely want to expand sectors where notifications are mandatory - semiconductors and critical inputs (amongst others) could well be expressly brought into scope. Companies should expect even more scrutiny of transactions and potentially more prohibitions including of deals that haven't previously raised national security concerns.

Looking ahead 

Following an orderly transition of power, the new government has been quick to roll up its sleeves and get to business with a full agenda for its first 100 days - including plans announced in the King's Speech to introduce a Cyber Security and Resilience Bill which wasn't mentioned in the manifesto. 

While we have a pretty good idea of Labour's vision for the tech landscape, the specifics of the new government tech policies are still unfolding and are likely to continue to evolve. We'll be following the journey - subscribe to this Tech Insights blog to stay up to date with key legal developments in the sector, in the UK and in other key tech jurisdictions.