UK unveils AI Growth Labs to slash red tape and accelerate innovation

TL;DR:

  • UK launches AI Growth Labs with regulatory sandboxes for safe AI testing in real-world conditions
  • Initiative targets healthcare, housing, professional services and manufacturing sectors
  • £1 million funding for MHRA to pilot AI-assisted drug discovery and clinical trial tools

The UK government has announced plans for AI Growth Labs that will allow companies to test new AI products with temporarily relaxed regulations under strict supervision, Technology Secretary Liz Kendall revealed at the Times Tech Summit on 21 October 2025.

Context and Background

These regulatory sandboxes will initially focus on healthcare, professional services, transport and advanced manufacturing sectors, operating as controlled testing environments where specific rules can be modified for limited periods. The approach aims to accelerate responsible AI deployment while maintaining safety through strict licensing schemes and safeguards.

The initiative includes £1 million in funding for the Medicines and Healthcare products Regulatory Agency (MHRA) to pilot AI-assisted tools for drug discovery and clinical trial assessments. Housing development applications, which currently generate 4,000-page documents and take 18 months to process, could see dramatic reductions in approval times through AI support.

Market Impact: With only 21% of UK firms currently using AI technology, the OECD estimates that increased adoption could boost UK productivity by 1.3 percentage points annually – worth £140 billion to the economy.

Looking Forward

The government will launch a public consultation on the AI Growth Lab proposals, considering whether the programme should be managed internally or overseen by regulators. The UK pioneered the sandbox model with the FCA’s 2016 fintech sandbox and aims to maintain its position at the forefront of regulatory innovation as countries including the EU, USA, Japan and Singapore implement similar AI testing frameworks.

Industry leaders have welcomed the announcement, with Revolut CEO Nik Storonsky noting it will provide “the clarity and speed we need to build and deploy groundbreaking AI services”. The initiative explicitly excludes consumer protection, fundamental rights, workers’ protections and intellectual property rights from sandbox exemptions.

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