Technology Secretary Peter Kyle is set to announce a £2.7 million government fund to support UK regulators in piloting AI systems to keep Britain at pace in the global race for tech leadership.

Kyle emphasised that the move is not about lowering safety standards but applying “smart regulation” to accelerate approvals and help British innovators compete globally.

The funding will support agencies such as Ofgem, the Civil Aviation Authority, and the Office for Nuclear Regulation in projects ranging from AI-assisted accident report analysis to unified regulatory guidance platforms and nuclear waste management pilots.

Key proposals include the introduction of AI-specific regulatory sandboxes to support experimentation in controlled environments, improved access to computer infrastructure, and the expanded remit of the AI Safety Institute.

The Secretary will also announce a “regulatory hackathon” for early 2026, where regulators and AI specialists will collaborate to design tools to speed up bureaucracy and avoid errors.

These are backed by government commitments to industrial strategy, technical infrastructure, and collaborative oversight.

The announcement arrives amid growing industry pressure for consistent and innovation-friendly regulation, with many business leaders warning that fragmented oversight risks stifle competitiveness.

While the direction has been welcomed, some voices caution against overselling AI’s short-term impact or compromising independent scrutiny in the rush to modernise.

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“Peter Kyle’s call for AI reform is a welcome step towards making AI regulation more responsive to business needs,” Stuart Harvey, CEO of Datactics, said.

“Too often, innovation is slowed not by lack of ambition, but by unclear governance and fragmented oversight.

“Creating space for innovation through AI-specific regulatory sandboxes and improving access to technical infrastructure would be a meaningful shift, but to make these ambitions real, we also need to ensure the data foundations are in place to build AI systems that are trustworthy, explainable, and scalable.”

“Any regulatory evolution must go hand in hand with investment in data quality and data governance. Without reliable data and clear lineage, even the most well-intentioned regulation can fall short. It’s encouraging to see a growing political appetite for a collaborative approach that balances innovation with accountability.”