Key facts
- Labour is warned that the UK risks foreign tech giants 'pulling the plug' on services.
- Discussions are ongoing regarding the UK's £1bn-a-year digital services tax affecting Meta and Amazon.
- Concerns exist that changes to the digital services tax could be made to appease US tech firms and Donald Trump.
- Labour MPs are reportedly considering welfare cuts to disability benefits and public sector job losses.
- Apple threatened to remove FaceTime and iMessage from the UK over proposed security feature regulations.
- Microsoft expressed dissatisfaction with UK competition watchdog decisions.
The UK is facing warnings that it risks foreign technology giants withdrawing services if it fails to strike a balance between regulation and appeasing US interests, particularly concerning potential changes to the digital services tax. Labour's Chancellor, Rachel Reeves, confirmed that discussions are ongoing regarding the £1bn-a-year tax, which impacts companies like Meta and Amazon. However, this has drawn criticism from within Labour and from the Liberal Democrats, who fear it could lead to appeasing Donald Trump and US tech firms at the expense of domestic welfare and public services.
Labour MP Rachael Maskell expressed concern that relief on the digital services tax could be seen as letting US tech companies 'off the hook' while disabled people bear the revenue loss through cuts to benefits. Clive Lewis, another Labour MP, described the situation as 'extractive politics at its worst' and an 'abject surrender' to appease tech oligarchs. Chi Onwurah, chair of the technology committee, also warned that concerns about artificial intelligence safety might be overlooked as the government delays regulation to curry favour with Trump.
Liberal Democrats leader Ed Davey stated that appeasement does not work with bullies like Trump and suggested the UK should respond to steel tariffs with tariffs on Tesla. He characterized Starmer's approach to Trump as 'let's be nice to him and hope he won't hurt us.' Starmer himself told the New York Times that he 'likes and respects' Trump and understood his points about European countries bearing a greater burden for collective self-defence.
Separately, tech firms have previously threatened to exit the UK market over regulatory demands. WhatsApp and Signal have threatened to quit over encryption demands, while Apple threatened to remove FaceTime and iMessage if proposed amendments to the Investigatory Powers Act, requiring Home Office approval for new security features before worldwide release, were enacted. Microsoft also reacted negatively when the UK's Competition and Markets Authority blocked its acquisition of Activision Blizzard, with its chief executive suggesting the EU is a more attractive place to do business.