LONDON — As governments around the world scramble to stay ahead in the frantic world of artificial intelligence, the U.K. is betting big on the next computing breakthrough: quantum. A national research program dating back over a decade has made the U.K. a leader in harnessing the properties of quantum physics to build computers capable of carrying out calculations in a fraction of the time taken by conventional machines. The program has given birth to several leading startups attempting to turn experimental efforts into large-scale, reliable computers that could give their owners an immense economic and national security advantage. Winning that race is a top priority for No. 10 Downing Street, which has identified quantum as one of six frontier technologies crucial to “U.K. security and sovereignty.” In a sign of its importance, Britain’s quantum prowess formed a central plank of the country’s technology partnership with the U.S. U.K. officials pointed to the industry as proof that the deal was not one-sided. Now, the government is preparing to significantly increase support for a small number of the most promising quantum startups, after Technology Secretary Liz Kendall said the U.K. must do “fewer things better.” According to six people familiar with discussions, the government plans to dedicate the bulk of a £670 million commitment for quantum computing to just a handful of startups, with payments tied to reaching certain technical milestones. Prime Minister Keir Starmer is expected to announce the plan early in the new year, two of the people said, though both cautioned that plans remain subject to change. “We are determined to unlock quantum’s benefits for society and the economy,” a spokesperson for the Department for Science, Innovation and Technology said, noting that the U.K. had backed “one of the largest commitments made to this technology of any government in the world.”  BIGGER BETS The U.K.’s early recognition of quantum’s potential has seen it capture 18 percent of global funding in the sector since 2020, according to a study by the Royal Academy of Engineering.  But there are fears that its lead could slip, with the U.S., China, Canada, Denmark, France and Germany all investing heavily, and some U.K. startups saying they are forced to look abroad to raise enough capital. A $1.1 billion takeover of leading British startup Oxford Ionics by U.S. rival IonQ this summer has only sharpened concerns, although the company plans to retain the U.K. as its R&D hub.  Winning that race is a top priority for No. 10 Downing Street, which has identified quantum as one of six frontier technologies crucial to “U.K. security and sovereignty.” | Mark Kerrison/Getty Images Jakob Mökander, director of science and technology policy at the Tony Blair Institute and co-author of a report warning that the U.K. risked squandering its lead in quantum, said: “Now is the time to make bets on promising startups that can grow into national champions.”  That’s been the key message in discussions between the sector and government officials on next steps, according to the people above.  “It is crunch time for quantum computing in the U.K. right now,” said Sebastian Weidt, founder of Universal Quantum.  Despite being based in the south of England, Weidt said the company has received more support from overseas, including a €67 million contract in Germany. France has also awarded €500 million to just five startups.  In contrast, Weidt said the U.K. has failed to move beyond small grants, arguing it needs to become a better customer of its “sovereign” companies or risk ceding “the great quantum computing foundations the U.K. has built over decades … to foreign players.”  “We need to see now more ambition, and we need to see more pace,” Gerald Mullally, CEO of Oxford Quantum Circuits, said, stressing that the U.K. must “act at a level of scale that is competitive relative to what we’re seeing in other nations.” LESS IS MORE Quantum computing is precisely the type of “critical sector where the U.K. has a global competitive edge” that the government should be getting behind, Ed Bussey, CEO of Oxford Science Enterprises, which backs university spin-outs, said. The industry now expects the government to put money where its mouth is, the people cited above said, with one suggesting a handful of companies could get up to £50 million each under the initiative. Procurement and government investment could also be forthcoming.  In recent weeks, the government committed to “leverage its procurement budgets to drive innovation,” including to “act as an early buyer for the best new technologies to de-risk investment, create demand, and pave the way to market.” As part of a “strategic reset,” the U.K.’s research and development funding agency UKRI will also become more “choiceful” in allocating £7 billion for scale-ups over the next four years to companies in areas where the U.K. has genuine international advantage, its CEO Ian Chapman has said. In a new five-year strategy, the British Business Bank also vowed to increase investment and take on greater risk “to support the most strategically important scale-up companies to stay in the U.K.”

BRUSSELS — The EU has struck a political agreement to overhaul the bloc’s foreign direct investment screening rules, the Council of the EU announced on Thursday, in a move to prevent strategic technology and critical infrastructure from falling into the hands of hostile powers. The updated rules — the first major plank of European Commission President’s Ursula von der Leyen’s economic security strategy — would require all EU countries to systematically monitor investments and further harmonize the way those are screened within the bloc. The agreement comes just over a week after Brussels unveiled a new economic security package. Under the new rules, EU countries would be required to screen investments in dual-use items and military equipment; technologies like artificial intelligence, quantum technologies and semiconductors; raw materials; energy, transport and digital infrastructure; and election infrastructure, such as voting systems and databases. As previously reported by POLITICO, foreign entities investing into specific financial services must also be subject to screening by EU capitals. “We achieved a balanced and proportionate framework, focused on the most sensitive technologies and infrastructures, respectful of national prerogatives and efficient for authorities and businesses alike,” said Morten Bødskov, Denmark’s minister for industry, business and financial affairs. It took three round of political talks between the three institutions to seal the update, which was a key priority for the Danish Presidency of the Council of the EU. One contentious question was which technologies and sectors should be subject to mandatory screening. Another was how capitals and the European Commission should coordinate — and who gets the final say — when a deal raises red flags. Despite a request from the European Parliament, the Commission will not get the authority to arbitrate disputes between EU countries on specific investment cases. Screening decisions will remain firmly in the purview of national governments. “We’re making progress. The result of our negotiations clearly strengthens the EU’s security while also making life easier for investors by harmonising the Member States’ screening mechanism,” said the lead lawmaker on the file, French S&D Raphaël Glucksmann. “Yet more remains to be done to ensure that investments bring real added value to the EU, so that our market does not become a playground for foreign companies exploiting our dependence on their technology. The Commission has committed to take an initiative; it must now act quickly,” he said in a statement to POLITICO. This story has been updated.

Andrea Dugo is an economist at the European Centre for International Political Economy. In the late 1400s, Italy was the jewel of Europe. Venice ruled the seas; Florence dominated art and finance; and Milan led in trade and technology. No corner of the Western world was more advanced. Yet, within decades, both its political independence and economic primacy were gone. Europe today risks a similar fate. Once the envy of the world, the bloc’s lead has eroded. The EU isn’t just politically divided, it’s also falling behind in industries that will define the rest of this century. Young talent is fleeing for the U.S. and Asia, while its economy increasingly resembles an open-air museum of past achievements. Whether in growth, technology, industry or living standards, Europe is in jeopardy of becoming a province in a world defined by others. And it stands to learn from Italy’s decline. The warning signs are unmistakable: Since 2008, the EU’s GDP expanded by just 18 percent, while the U.S. grew twice as fast and China grew nearly three times bigger. Tourism across the continent is still booming, of course, but the millions chasing their Instagram-able escapes aren’t enough to offset stagnation, and also bring costs. The bloc’s fall in living standards echoes Renaissance Italy as well. Around 1450, Italy’s income per person was 50 percent higher than Holland’s. A century later, the Dutch were 15 percent richer, and by 1650, they were nearly twice as rich. Modern Europe is slipping even faster than that. In 1995, Germany’s GDP per capita was 10 percent higher than America’s, whereas today, the U.S. is 60 percent higher. At this pace, Germany’s prosperity levels could shrink to a third of its transatlantic partner’s within a generation. Much like in Renaissance Italy, this economic malaise reflects a deep technology gap. Once the queen of the seas, Venice clung to old technology and paid the price. Its galleys, superb in calm Mediterranean waters, were no match for the ocean-going caravels that carried Spain and Portugal across the world. Modern Europe is now doing the same: On artificial intelligence, the EU invests barely 4 percent of what the U.S. does. Today, OpenAI is valued at $500 billion, while Europe’s biggest AI startup Mistral is worth just $15 billion. And though it pioneered the science in quantum, Europe trails behind in commercialization — a single U.S. startup, IonQ, raised more capital than all the bloc’s quantum firms combined. Even when it comes to batteries, Sweden’s much-touted Northvolt collapsed in March, only to be snapped up by a Silicon Valley startup. Traditional industries are faltering too. Taken together, Germany’s top three carmakers are worth just an eighth of Tesla. Ericsson and Nokia, once world leaders in mobile network technology, lag behind Asian rivals in 5G. And France’s Arianespace, once dominant in satellite launches, now hitches rides on tech billionaire Elon Musk’s rockets. The problem isn’t invention, though — it’s scale. Despite its top engineers and universities, nearly 30 percent of the bloc’s unicorns have transferred to the U.S. since 2008, taking its most entrepreneurial spirits with them. It seems the continent sparks ideas, while America fuels them and profits — yet another pattern that mirrors Italy, which supplied talent as others built empires. Its greatest explorers like Columbus, Cabot, Vespucci and Verrazzano had also trained at home, only to sail under foreign flags. The prescriptions are known. Former Italian Prime Minister Mario Draghi detailed them in his report on the EU’s future. | Thierry Monasse/Getty Images The fundamental issue in both cases is political. Like Italy’s warring city-states in the 1500s, today’s Europe is divided and feeble. Capitals quarrel over energy, debt, migration and industrial policy; a common defense strategy remains only an aspiration; and ambitious plans for joint technology spending or deeper capital markets get drowned in debate. This disunity is what doomed Italy as it fell prey to foreign powers that eventually carved up the peninsula. And the bloc’s current divisions leave it similarly vulnerable to global competitors, as Washington dictates defense; Russia menaces the continent’s east; China dominates supply chains; and Silicon Valley rules the digital economy. But is this all fated? Not necessarily. The EU has built institutions Renaissance Italy could never have dreamed of: a single market, a currency, a parliament. It still hosts world-class research institutions and excels in advanced manufacturing, pharmaceuticals, aerospace, green energy and design. The continent can still lead — but only if it acts. Sixteenth-century Italy had no such chance. Geography trapped it in the Mediterranean while trade routes shifted to the Atlantic, and commerce stagnated. New naval technologies left its fleets behind, and its brightest minds sought their fortunes abroad. But Europe faces no such limit. Nothing is stopping it other than its own political timidity and fractiousness. The bloc needs to accept costs now in order to avoid the greatest of costs later: irrelevance. It needs to invest heavily in frontier technologies like AI, quantum, space and biotech, while also building real defense and creating deep capital markets so that start-ups can scale up at home. The prescriptions are known. Former Italian Prime Minister Mario Draghi detailed them in his report on the EU’s future. What’s missing is political will. Once Europe’s beating heart, Italy eventually became a land of visitors rather than innovators. And history’s lesson is clear: Its culture endured, but its power withered. The EU still has time to avoid that destiny. Europeans can either wake up or resign themselves to becoming a continent of monuments and echoing memories.

BRUSSELS — The European Commission is in talks with eight of Europe’s top investors to involve them in a fund to support homegrown companies working on critical technologies. Representatives from the private investors are in Brussels on Tuesday to discuss their involvement, according to a planning note seen by POLITICO. The fund has been in the works since the spring and will combine EU money with private investment to fill a late-stage financing gap for European tech startups — buying stakes to support companies ranging from artificial intelligence to quantum. It could range from €3 billion to €5 billion, depending on how much investors contribute. The investors invited to meet with the Commission on Tuesday are Danish investment company Novo Holdings, the Export and Investment Fund of Denmark, Spanish CriteriaCaixa and Santander, Italian Intesa Sanpaolo, Dutch pension fund APG Asset Management, Swedish Wallenberg Investments, and Polish Development Bank Gospodarstwa Krajowego, according to the planning note. The fund will focus on “strategic and enabling technologies,” the note read, including advanced materials, clean energy, artificial intelligence, semiconductors, quantum technology, robotics, space and medical technologies. The Commission is seeking to address the issue of companies struggling to scale in Europe. Many turn to investors from the U.S. or elsewhere for late-stage financing, after which they often relocate. The goal of the fund is to make sure that startups that have completed their early funding rounds can “secure scaleup financing while maintaining their headquarters and core activities in Europe,” the note said.  The fund follows an earlier effort to take direct equity stakes in companies through the European Innovation Council Fund. Investments under the EIC Fund are capped at €30 million, while the new fund would invest €100 million or more. The fund will launch in April. Other investors could still come in at a later date. In November, the Commission plans to begin the search for an investment adviser — a process that should be wrapped up by January, according to the planning note.

LONDON — Prime Minister Keir Starmer will meet India’s Narendra Modi in Mumbai next week to drive forward their tech and security partnership, multiple people familiar with the planning told POLITICO. It is Starmer’s first visit to the country as prime minister and comes just months after the U.K. and India finally closed their long-desired trade deal under the shadow of Donald Trump’s tariff war. The focus of the visit will be on fintech, “tech-related partnerships” and the “great trade deal that we’ve finally signed,” said an Indian official, granted anonymity to discuss the plans. In India’s financial capital, Starmer and Modi will speak at the world’s largest fintech festival, before joining senior ministers and officials to advance the 2024 U.K.-India Technology Security Initiative (TSI). The pact covers co-operation on telecoms, critical minerals, artificial intelligence, quantum, bio-tech, advanced materials and semiconductors. “Both sides are trying to lean in to try and figure out: How do we bring business into it? How do we bring seed capital in to support it? And what are the specifics that we can get as early harvest wins?” said a person close to the planning, also granted anonymity. Starmer and Modi will look at the seven pillars of the TSI and see “which are the ones that can move fastest,” they said. MOONSHOTS In May, researchers at the Carnegie Endowment for International Peace, an international think tank, called for “a greater dose of ambition and creative thinking” in the TSI with a focus on “moonshot projects.”  They call for marrying India’s manufacturing strengths with Britain’s R&D work, including in graphene semiconductors, and a joint quantum lab. During Modi’s July visit, the U.K. government said the TSI partnership would lead to the creation of a joint center on AI. Collaboration on graphene and critical minerals is also underway with the second phase of the UK-India Critical Minerals Supply Chain Observatory due to begin. Starmer will bring business delegations in tow, including ones focused on education and critical minerals. The TSI is overseen by the national security advisers in each country and is reviewed every six months. One of Starmer’s deputy national security advisers was in India last week “for a conversation on some of the outcomes that they think are moving,” according to the person close to the planning cited above. Collaboration on critical minerals is one of the workstreams that is “moving quickly,” the person added, saying the conversations could lead to “a good set of outcomes and announcements.” Britain and India will also hold a joint economic trade council meeting, a ministerial process with business, to look at how to leverage the trade deal Modi and Starmer struck in July. “Different sectors will have different opinions of what might be a problem, what is still a problem, or what could be improved in a regulatory way,” they said, noting that while not every will get resolved immediately, that the process provides “clarity” that will allow both sides to ensure the trade deal provides value immediately when it enters into force.

LONDON — U.S. tech companies unveiled £31 billion of investments in Britain Tuesday, timed for the arrival of President Donald Trump on his second state visit to the country.  OpenAI, Nscale and Nvidia announced a U.K. version of Stargate — a massive AI infrastructure scheme — with its first data centers slated to be located on the site of a former coal power station in Northumberland, north-east England.  The U.K. government said Tuesday the site near Blyth would become an AI Growth Zone — areas of the country earmarked for AI data centers. It will also link to nearby Newcastle University and a business park. The government said the site could mean the addition of 5,000 new jobs in the region.     Those data centers will be powered by Nvidia chips and the company said it would ship up to 120,000 advanced GPUs to British data centers in total, funded by investments from Microsoft, Nscale, OpenAI and CoreWeave.  Around half of those GPUs will go to British data center firm Nscale, which is partnering with Microsoft to build Britain’s largest AI supercomputer in Loughton, Essex, using 23,000 Nvidia chips. OpenAI Chief Executive Sam Altman said Stargate UK, which will bring 8,000 GPUs to the country, would “accelerate scientific breakthroughs, improve productivity, and drive economic growth.” The biggest chunk of investment will come from Microsoft, which said it would invest £22 billion in the U.K. over the next four years. Microsoft said around half of that figure would go towards capital expenditures on AI infrastructure, while the rest would support the company’s ongoing operations in the U.K., including in AI model development, its gaming division, and general product development. “We’re focused on British pounds, not empty tech promises,” Microsoft President Brad Smith said in a press conference Tuesday. Fellow tech giant Google cut the ribbon on a new data center on Tuesday in Waltham Cross, Hertfordshire, and said it would commit to spend £5 billion in the U.K. over the next two years. AI cloud computing company CoreWeave will also invest £1.5 billion in the U.K., which includes the expansion of a data center near Airdrie, North Lanarkshire, powered by renewable energy and using Nvidia chips.  U.K. Tech Secretary Liz Kendall said: “This is a vote of confidence in Britain’s booming AI sector.”  The flurry of investment comes ahead of the two countries signing a “Technology Prosperity Deal” Thursday, pledging closer co-operation on AI, quantum, space and nuclear energy.  U.S. AI startup Scale AI will also invest more than £39 million in the U.K. over the next two years, expanding its European HQ in London and quadrupling its employees by the end of next year. Global asset manager BlackRock is putting £500 million into U.K. data centers, including £100 million for the expansion of a site west of London. Oracle, meanwhile, has reaffirmed a previously-announced $5 billion investment in the U.K. 

LONDON — At a couple of pages long, the technology pact the U.S. and the U.K. will sign this week when President Donald Trump lands in London will be easy to miss amid the circus of a state visit. But what will be impossible to ignore is the group of technology heavyweights joining Trump’s entourage. Nvidia boss Jensen Huang, who is hosting a party in London’s King’s Cross on Thursday night, OpenAI’s Sam Altman and Blackstone chief executive Stephen Schwarzman are among those accompanying the U.S. president. Nvidia is due to announce an investment in Britain’s biggest data center, planned for Blyth in northeast England, according to three people familiar with the plans. A subsidiary of Blackstone is leading the project and OpenAI is also involved. It is expected to be billed as a British “Stargate,” similar to a Norwegian version the companies announced in July. The tech pact Trump will agree with Prime Minister Keir Starmer has paved the way for some of that investment, the U.K. embassy in Washington believes. The document focuses on building partnerships — through R&D, procurement and skills — in AI, quantum and space, according to two people briefed on it. A U.K. government spokesperson claimed the pact would “change the lives” of Brits and Americans, while U.K. Technology Secretary Liz Kendall said: “Boosting our tech ties with the U.S. will help us deliver the change people here at home expect and deserve.” A separate agreement on nuclear energy will also come during the state visit, fast-tracking reactor design checks between the two countries. It includes plans to build data centers powered by small modular reactors at the former coal power station in Cottam, Nottinghamshire. MADE IN THE USA  Britain pitched the pact to Washington as a way for Western democracies to beat China in the technology race and set a “gold standard” in digital rulemaking. Yet while the country’s AI strategy talks about sovereignty, with only £2 billion of public money set aside to deliver it, Britain is heavily reliant on U.S. investments and technology to make it happen. Gaia Marcus, director of the Ada Lovelace Institute think tank, warned of increased U.K. reliance on America. “The public deserves to understand who really benefits from these partnerships and what the return will be for taxpayers in years to come,” she said. “We mustn’t just focus on what the figures look like today, if the cost is technological lock-in tomorrow, limiting our ability to seek alternatives in the future.”  Nvidia is due to announce an investment in Britain’s biggest data center, planned for Blyth in northeast England, according to three people familiar with the plans. | Ina Fassbender/Getty Images Chi Onwurah, chair of the House of Commons Science, Innovation and Technology Committee, said: “Whilst I’m pleased that the U.K. is an attractive place for U.S. investment, the U.K. needs to take decisions that are in its long-term strategic interest; true technology sovereignty cannot mean being dependent on one investor or country.” But Keegan McBride, senior policy advisor in emerging technology and geopolitics at the Tony Blair Institute, said the U.K. has little choice as only the U.S. or China were able to provide it with the AI infrastructure it needed to compete. “For the U.K. and for many other countries that want to access frontier AI capabilities, the United States represents the best option,” he said.  The Trump administration, meanwhile, wants to sell American AI “packages” to its allies, pitching them as a form of AI sovereignity. “We are committed to finding a way to enable America’s private companies to meet your national technological needs,” White House tech policy chief Michael Kratsios told APEC members at a conference in South Korea this August.  Another prize for U.S. tech companies is large government contracts. Britain’s defense department announced a £400 million deal with Google Cloud last week, while Nvidia, OpenAI, Anthropic and Google Cloud signed separate partnership agreements with the U.K. government earlier this year.   JUST DON’T MENTION RULES  The U.S.-U.K. tech pact is expected to avoid the thornier issue of online regulation, but it is something the White House has pressured the U.K. government on throughout trade negotiations. Starmer also faces domestic pressure from Nigel Farage, leader of the populist and poll-topping Reform UK party, who compared Britain’s free speech laws to North Korea in the U.S. Congress this month.  Starmer has repeatedly defended Britain’s Online Safety Act, including in front of Trump at his Scottish Turnberry resort in August, while Trump has also attacked the Digital Services Tax and competition regulations.  McBride said: “There is a growing number of regulatory concerns on the side of the United States, particularly regarding censorship and free speech, that could disrupt tech relations between the two countries.”    One person briefed on the agenda for Trump’s visit said: “There are three regulatory pieces that the U.S. is really concerned about in Europe right now. They’re going to be looking … to see some sort of support from the U.K.”  They listed the Digital Services Tax, which the government has repeatedly ruled out ditching, the EU’s Digital Markets Act, and the CSDD (an EU supply chain disclosure reporting standard). “There are people inside the White House that are very set on expanding the U.S.-U.K. relationship as a means to counterbalance the EU, and I think that’s a big part of this trip.” 

LONDON — Keir Starmer will welcome German Chancellor Friedrich Merz to London Thursday to sign the biggest U.K.-German treaty since 1945 — and this time, they do want to mention the war. Despite sitting on different sides of the political spectrum, the two men have more in common than initially meets the eye. Crucially, center-left Prime Minister Starmer and conservative Merz have a shared ambition to provide leadership on Europe’s defense. The two leaders will use the visit to finalize a wide-ranging pact that goes big on security cooperation. It will include promises to develop a new long-range missile system and a mutual assistance pledge, spelling out that a threat to one country would likely be seen as a threat to the other, as first reported by POLITICO. Merz’s trip has gained fresh impetus after U.S. President Donald Trump’s announcement this week that he is ready to turbo-charge the supply of weapons to Ukraine. London and Berlin are expected to confirm collaboration on quantum technology, artificial intelligence and other longer-term projects too, including offshore energy links in the North Sea and a rail connection between Germany and the U.K. Yet warm words will likely gloss over some of the more fundamental challenges both leaders face. Starmer will be eager to shout about measures to crack down on illegal migration — but it’s unclear how far any steps announced Thursday will take either side towards easing the huge domestic pressure they face on the issue. BROTHERS IN ARMS  A lawyer in his 60s who ascended to Germany’s top job with relatively little political experience, Merz has a fair few things in common with his British counterpart.  The pair have both faced sharp demands to cut immigration since they entered office, from which they’ve sought some respite on the global stage. Both have produced unexpected gambits to massively boost defense spending as the U.S. pivots away from Europe.  While Starmer has endeavored to match the previous U.K. government’s strong backing for Ukraine, Merz is seen as more hawkish than his predecessor Olaf Scholz, bringing the UK and Germany into closer alignment.  A German government official, granted anonymity to speak candidly like others in this piece, described the relationship between them as “excellent.” They added that Merz was impressed by Starmer’s ability to “express himself very precisely,” particularly when dealing with Trump. Starmer’s administration has courted Berlin assiduously, pledging to strike a defense agreement with Germany before taking office last year and seeking to rebuild relations with the EU. Nick Hopkinson, a former director of Wilton Park, the Foreign Office’s agency for fostering German-British relations, said: “The key thing for Germany is that now that U.K.-EU relations have been reset, that opens up avenues for closer cooperation.” The two men have met multiple times in recent weeks, at international summits and on a train to Kyiv with France’s Emmanuel Macron in May. A Chancellory insider said Merz was particularly keen for Starmer to be involved in that trip. TRIPLE THREAT The German leader’s visit to London cements the third side of a European “triangle alliance” after Macron’s State Visit last week, as the three powers try to shore up support for Vlodomyr Zelenskyy.  A British minister said the three-way coalition was of increasing importance, and that Germany’s forced step back during the transition period between Scholz and Merz had “definitely been felt” in London. On that trip to Kyiv with Macron, Starmer and Merz sat at opposite ends of the train. As Starmer walked through the train, he declared: “If you want to get to Germany, you have to get past France.” The comment appeared to be a reference to France’s somewhat more guarded stance on U.K. participation in EU matters since Brexit. Nicolai von Ondarza of the German Institute for International and Security Affairs (SWP) think tank said: “Merz has put special emphasis on integrating the U.K. into European security initiatives, and there is a real ambition to coordinate on defense.” Building on the Trinity House Agreement signed last year, the leaders are set to announce joint export campaigns for jointly produced equipment, while working together on a new missile system with a range of over 2,000 km to be delivered in the next decade. Merz’s arrival in London also provides a chance to discuss Trump’s new drive to send American weapons to Ukraine. A British diplomat said they were extremely pleased with the outcome following intensive discussions with France, Germany and NATO that predated last month’s summit at The Hague. They said “anything that gets more U.S. weaponry into Ukraine faster is good news,” confirming the U.K.’s support for the plan, in common with Germany, but in contrast to France, which was not on an early list of backers. Merz and Starmer will be able to pore over the nitty-gritty, such as who pays for what and in which framework, along with more specific details like whether Europeans will buy U.S. weapons to be delivered to the battlefield, or whether they will give Ukraine weapons from existing stockpiles and buy replacements from the U.S. LIMITED MOVEMENT While the two countries are keen to trumpet their shared goals on defense, other parts of the relationship will be trickier to navigate.  Starmer is keen to discuss efforts to tackle illegal migration whenever he meets foreign leaders — as he did when Emmanuel Macron was in town last week — but joint endeavors in this area could prove limited. The U.K. wants Germany to ramp up prosecution of smuggling gangs on its turf, although the substance of that plan was already agreed between the two interior ministries last year. Downing Street stressed the necessary changes to German law would now be made by the end of the year. Von Ondorza said that while Merz was more open than Scholz to making migration “a central pillar” of their interactions, it was “less clear” what Britain and Germany could do to help each other on this front compared with France. Then there is the vexed topic of movement between the two countries. Starmer and Merz are expected to confirm changes which will make it easier for German schoolchildren to visit the U.K.  A second German official said it was “a tangible result” from bilateral discussions on mobility, while the bigger prize of an EU-wide agreement on students coming to Britain — something Berlin is pushing hard for — is still distant. Meanwhile, German officials have warned it will still be “some time” before all British passengers are allowed to use e-gates when entering the country — something Starmer hailed as a win from the recent EU-U.K. “reset” agreement. Frequent travelers to Germany are set to gain access to e-gates as an interim step, however. For now, visits between Berlin and London remain a little easier for Merz and Starmer than for the citizens of the countries they lead. Sam Blewett and Jon Stone contributed reporting.

LONDON — In James Bond films, Britain’s spies are kitted out with exploding pens and poisoned cigarettes. Nowadays, spies are more likely to work with AI-enabled drones, specially encrypted communications networks, and quantum sensors able to avoid signal jamming.  And they might be funded by the National Security Strategic Investment Fund — a secretive fund with ties to Britain’s intelligence agencies like GCHQ, MI5 and Bond’s MI6. After years of NSSIF operating largely from the shadows, the U.K. government is preparing to give a more prominent role to the fund — alongside a £330 million uplift to its financial firepower over four years. (NSSIF declined to comment when asked by POLITICO what its previous budget was. The figure is not publicly available.) That cash will “strengthen its ability to invest in companies which address our national security and defense requirements,” as part of a renewed focus on “the increasingly critical intersection between dual-use technologies and national security and resilience as international cooperation for technology supremacy intensifies,” the government said in its recently published Industrial Strategy. In turn, NSSIF is stepping up its public presence, hiring a communications officer and participating in more public events. The fund’s emergence from relative stealth at a time of heightened geopolitical tension and rapid technological change is no coincidence, according to several people familiar with its work who spoke to POLITICO. Some were granted anonymity due to the fund’s sensitivity. That not only reflects a growing consensus that future conflicts will be shaped by technology like AI as governments draw lessons from the war in Ukraine, they said, but that military advantage and economic growth both increasingly rely on adopting cutting edge innovation. More conventionally, they said, NSSIF’s combination of making strategic commercial bets and breaking down barriers for startups offers a blueprint for tackling the U.K.’s perennial challenge of turning its most promising startups into established leaders. The question now is whether its mission can survive a move into the spotlight. WHAT IS IT? When NSSIF was established in 2018, the world was “entering a period of strategic competition and the idea that the West, democracy, was ceding technological advantage” to authoritarian rivals, NSSIF senior investment partner Edmund Phillips told an event in London this month. The fund was the brainchild of Anthony Finkelstein, a cybersecurity expert and the government’s then-chief scientific adviser for national security. As of 2023, NSSIF had invested £220 million in funds and startups developing dual-use technologies, from quantum-enabled chips to networks of earth-observing satellites. | Marijan Murat/Picture Alliance via Getty Images “I was very, very interested in better ways that the U.K. national security community could innovate faster with greater effect … and also use that as a lever for U.K. growth,” Finkelstein told POLITICO, explaining that his thinking was influenced by In-Q-Tel, a U.S. venture fund that aims to create a pipeline of new technology for the CIA. After an unsuccessful attempt to create a joint fund with the U.S. and Australia, NSSIF was founded under Conservative Chancellor Phillip Hammond as a joint venture between the government and British Business Bank. “NSSIF invests commercially in advanced technology firms alongside co-investors, supporting long-term equity investment — ‘patient capital’ — and harnesses the government’s unique technology expertise,” a 2020 guidance document explains. “Its objectives include accelerating the adoption of HMG’s future national security and defence capabilities and the development of the U.K.’s dual-use technology ecosystem.” As well as channeling some money into other VC funds, NSSIF takes equity in startups identified as being essential to the U.K.’s sovereign needs. It also operates “work programs” to rapidly prototype and trial technology in government. “We’ve basically enabled those who had an understanding of the capabilities to actually take a stake in the companies,” one technology specialist who previously advised NSSIF explained. “Then the [Ministry of Defence] can say: … ‘at least I know that the U.K. will have the ability to manufacture x, because the capital investment is being made here and the skills are growing up here.’” In one example, Portugese drone maker Tekever announced a £400 million investment in the U.K. in May. Six months earlier, NSSIF had been among participants in a €70 million fundraising round for the company. As of 2023, NSSIF had invested £220 million in funds and startups developing dual-use technologies, from quantum-enabled chips to networks of earth-observing satellites. There are no more recent figures available, and NSSIF declined to provide one when asked by POLITICO. Many of its investments are kept under wraps, but for the most part “the technology isn’t secret. It’s who you do it to that’s secret,” Finkelstein said. HOW IT ALL WORKS Promising startups are drawn to NSSIF’s attention by a network of specially accredited (and security-cleared) venture capitalists on the lookout for tech which might one day solve a problem for the U.K.’s security and defense agencies. NSSIF’s sparse website lists 13 funds as “investment partners,” alongside which it regularly co-invests. Officials in NSSIF also provide insight to security officials about notable developments in the market, aided by close links in personnel. LinkedIn pages show staff are frequently drawn from the Foreign Office or stints in British consulates overseas. Finkelstein was succeeded as chief scientific adviser for national security by Alex van Someren, a managing partner at Amadeus Capital Partners, one of the first VC funds to partner with NSSIF and which regularly co-invests in companies. More important than NSSIF’s investment ability is its ability to connect companies with customers in government, Finkelstein said. “One of the biggest contributions that government can make to driving innovation … is to be an early user,” he said. A relationship with NSSIF helps startups understand the needs of the intelligence and defense community, while allowing it to shape technology at an early stage. “You can sit in the abstract and guess at what you think a customer might want, but you really have to have a conversation with them and actually get dug into the details,” explained Anne Glover, CEO of Amadeus Capital. According to David Sully, a former U.K. diplomat and founder of AI firm Advai, which received NSSIF investment, the fund’s support is vital in helping early-stage companies overcome the so-called “valley of death,” when startups are often crushed by high upfront costs. The ability to cut through Britain’s notoriously labyrinthine procurement process is invaluable to startups working in sensitive areas, echoed Steve Brierley, CEO of quantum computing firm Riverlane, which has also received NSSIF investment. Government contracts don’t just provide revenue, but credibility with private investors. Prime Minister Keir Starmer recently called for the U.K. to “drive innovation at a wartime pace.” | Pool photo by Andy Rain via EPA Ed Wood, vice-president of quantum startup Nu Quantum, another NSSIF beneficiary, said its support was “transformational” in allowing the company to invest. “During our first meeting with NSSIF in January 2023, we were told the investment process could be ‘stodge free’,” he said “Admittedly, we were a little sceptical, but the pace, clarity and energy of our NSSIF lead quickly proved otherwise.” COMING OUT OF STEALTH The expansion in NSSIF’s role comes as the U.K. and its NATO allies are determined to get cutting-edge tech to the frontlines faster in the wake of the war in Ukraine. At a summit in June, NATO leaders agreed to “significantly accelerate the pace at which the Alliance adopts new technological products, in general to within a maximum of 24 months.” Geopolitical tensions, including China’s weaponization of supply chains and President Trump’s trade threats, have also brought concerns about sovereignty and ensuring access to critical technologies front of mind. That’s forced national security officials on a “cultural journey” to recognize that preserving technological advantage requires actively building links with the private sector, Finkelstein said. Meanwhile, technology companies have become increasingly open to working with defense and intelligence agencies amid heightened geopolitical tension — and a historic increase to defense spending. According to NSSIF’s Phillips, “four or five years ago, you didn’t see a huge number of entrepreneurs wanting to tackle this space. They wanted to do climate change, health and various brilliant things … There is a cohort of entrepreneurs now who want to go after this.” That relationship will be essential to meet Prime Minister Keir Starmer’s recent call for the U.K. to “drive innovation at a wartime pace,” promising to allocate more of the country’s increased defense budget on cutting-edge technologies in the wake of a major Strategic Defence Review. That will require “innovation and procurement measured in months, not years,” the review said. The Ministry of Defence is undertaking major reforms to how it buys technology, including by creating a dedicated Defence Innovation unit, while the U.K.’s Department for Science, Innovation and Technology said last month it will work more closely with the MoD “to pull through innovative capabilities to mission at speed and foster a thriving and world-leading U.K. defence technology sector.” In a long-term plan last month, DSIT said backing dual-use technology through better use of procurement and a greater share of R&D funding would not just boost the U.K.’s security, but benefit the U.K.’s broader tech sector. Last week, DSIT told the U.K.’s national AI institute to refocus its work on security and defense, after rebadging the U.K.’s AI safety institute as the “AI Security Institute” earlier in the year. THE LIMITS OF SUCCESS In the U.S., startups backed by In-Q-Tel have been acquired by the likes of Google and Amazon, or else grown into giants in their own right such as Palantir. In the U.K., some people initially doubted whether NSSIF would find similar success, the investor cited above said. “I went from being mad to being farsighted,” Finkelstein recalled. “Modesty aside, they’ve done some quite successful startups.” As NSSIF expands its work, it can expect greater scrutiny of its record by ministers and the public. But DSIT said in a recent press statement that the fund has backed a number of startups which have reached billion-dollar “unicorn” status, crowding in private investment and creating jobs. “The main thing that it [NSSIF] needed to do is to be bigger,” Riverlane’s Brierley said, adding that the prospect of more money could be “really transformational” and allow NSSIF to participate in larger, later-stage funding rounds. Ministers have spoken publicly about replicating the NSSIF model to back other government missions, such as health or net zero. But five people close to NSSIF said that despite its success, it isn’t a silver bullet for the deep seated issues start-ups face in the U.K. While more cash and attention is welcome, NSSIF must ensure it retains its commercial approach and narrow focus on cutting-edge tech, they said. In June, startup Oxford Ionics accepted a $1.1 billion takeover from U.S. firm IonQ, lamented by some as another example of promising British startups moving abroad. (Oxford Ionics says it plans to keep its research base in the U.K.) But the deal is expected to see millions of pounds in profit returned to the Treasury, as NSSIF held equity in the company, which develops quantum systems. Sully, of Advai, argued that these are the type of commercial deals that NSSIF should be making, with returns reinvested to back the next generation of founders. What makes NSSIF unique is its commercial focus and “pure government self interest,” he said, arguing that it’s something the U.K. will have to get more comfortable with as NSSIF’s work grows. “We’re not as good at self interest as the U.S.,” he said.

BRUSSELS — The European Union wants to speed up quantum computing, but cybersecurity officials warn that it comes with a gargantuan risk: an impending quantum security doomsday. The European Commission on Wednesday warned that Europe has fallen behind the United States and China in rolling out the technology, in a new quantum strategy aimed at drawing investment and turning the bloc’s know-how into an economic advantage. Quantum computing is seen as the next frontier in technology. Its capabilities surpass those of existing supercomputers, enabling it to solve problems in areas ranging from drug discovery to battery technology, as well as communications and navigation tech for defense and space. However, it also presents a big problem for cybersecurity. Modern-day digital communications, internet traffic and data collections are secured using a system called public key cryptography, which relies on complex mathematics that regular computers can’t solve. But quantum computers — which are many times more powerful than today’s computers — could crack those codes easily, experts have warned. “Everything breaks,” said Nigel Smart, a professor with the computer security and industrial cryptography department at KU Leuven, a Belgian university. “Your phone, the internet, everything breaks. Not break as in doesn’t work, breaks as in, it’s not secure.” Once quantum computers reach the inflection point, it would effectively mean that most of today’s data zooming around on internet wires would be readable to anyone tapping in. A particularly eerie problem is what’s known as “store now, decrypt later,” where threat actors — notably intelligence agencies — take data that’s encrypted with public key cryptography, retain it and then unlock it once quantum computing technology is sufficiently advanced. The challenge for European countries will be to defend themselves against these emerging threats — or else fall prey to foreign spooks, cyber crooks and hackers. The European Union warned in its quantum strategy on Wednesday that the bloc is at risk of seeing promising homegrown quantum tech firms falling into the hands of foreign players. Europe is the global leader in the number of scientific publications on the technology, but private investment has mostly gone elsewhere: Europe attracts only 5 percent of global private quantum funding, compared to over 50 percent by the U.S. and 40 percent by China, according to the EU’s calculations. The details of the strategy were first reported by POLITICO. 2030 DEADLINE In parallel with the Commission’s grand plan to speed up on quantum, European authorities have been developing guidelines to mitigate the risks of encryption being broken. Cybersecurity authorities released a roadmap last month to transition to post-quantum cryptography, a type of algorithm that could resist quantum computers. It suggested that EU countries protect critical infrastructure with post-quantum cybersecurity by the end of 2030 — a deadline first reported by POLITICO. U.S. tech giant IBM, a frontrunner in quantum tech, recently announced it expects to have the first workable quantum computer by 2029. | Angela Weiss/AFP via Getty Images The dates proposed by European cyber officials roughly aligned with those put forward by the United States, the United Kingdom and Australia. U.S. tech giant IBM, a frontrunner in quantum tech, recently announced it expects to have the first workable quantum computer by 2029. That underlines the urgency of securing critical data. “The fact that we have this roadmap now and that all of the EU member states agreed on this … I think this is really a big step,” said Stephan Ehlen, a cryptography expert at the German cybersecurity agency and one of the authors of the roadmap. But making a plan is just the start. “This is not only about these algorithms, it’s a huge migration problem … It affects billions and billions of systems,” said Bart Preneel, a cryptographer also from KU Leuven. “It’s a very complex problem that you cannot solve in a few A4s.” It’s also a problem that hits home with national governments and their security and intelligence services. Several European governments have imposed export restrictions on quantum technology; the real concern for governments is whether their own communications are affected, and whether “everything they’re doing can be exposed,” Preneel said. Some experts have downplayed a doomsday scenario for quantum, arguing that even if computers are developed that can break modern encryption, it still requires a significant amount of work and money to do so. The EU has no excuse not to push on, said Manfred Lochter, another official at the German cyber agency. “If you don’t have access to quantum technologies, then you’re lost.”