Business

The government has made a £25 million investment in Kraken Technologies in a bid to persuade the fast-growing artificial intelligence business to list in London rather than New York.

The investment, made by the British Business Bank, is the state lender’s largest direct commitment to a single company to date and forms part of Kraken’s wider $1 billion funding round ahead of its demerger from Octopus Energy.

Ministers hope the backing will help anchor the $9 billion AI platform in the UK and support a future flotation on the London Stock Exchange, amid growing concern about Britain’s ability to retain high-growth technology firms.

Speaking during a visit to Kraken’s London headquarters, business secretary Peter Kyle said the investment formed part of a broader £125 million package designed to help scale-up companies grow and list domestically.

“I want Kraken to be known as a British success,” Kyle said. “I want the London Stock Exchange to be a beacon for global investors as well as British companies looking to go public.”

Kraken is an AI-powered software platform that manages billing and customer services for energy companies. Originally developed by Octopus Energy, the platform has been licensed to several rival suppliers and now handles billing for around half of all UK households, as well as roughly 55 million households worldwide.

Last month, Kraken secured a $1 billion investment from new and existing shareholders as part of its separation from Octopus Energy, valuing the business at $8.65 billion.

Greg Jackson, founder of Octopus Energy and a government adviser, said he would personally prefer to see Kraken list in London, but acknowledged competition from overseas markets.

“The UK has to win it on its merits,” he said. “Having the British Business Bank at the table means it can influence whether a listing ends up in London or New York.”

Jackson said Kraken could be ready to list as early as 2027, but stressed there was no fixed timetable. “It will be about when the company is ready,” he said.

The move comes amid heightened scrutiny of the UK’s capital markets following a wave of de-listings, aborted IPO plans and companies shifting their primary listings overseas, particularly to the United States. While there have been tentative signs of recovery in London’s IPO market, ministers are under pressure to demonstrate that Britain can support companies through the crucial scale-up phase.

Alongside the Kraken investment, the government announced two £50 million commitments to life sciences and technology funds, including Epidarex Capital and IQ Capital, as part of what Kyle described as “big bets on the industries where Britain can win”.

The government has also pledged £180 million for battery research and development through a £452 million innovation programme under its industrial strategy, and is pressing ahead with plans to reduce regulation, including reviews of health and safety and agricultural technology rules.

The role of the British Business Bank has been expanded following Labour’s spending review and industrial strategy last year. The bank, which is headquartered in Sheffield and was established in 2014 to improve access to finance for UK businesses, received £6.6 billion in new capital in June, taking its total financial capacity to £25.6 billion.

Kyle, who took over as business secretary in September, said the aim was to ensure Britain’s most promising companies grow at home rather than being sold or listing overseas.

“We are the start-up capital of Europe,” he said. “But we are not yet good enough at scaling and keeping businesses here, to build here, grow here and expand here. Too often, companies reach a certain size and then move on.”

Ministers say targeted state-backed investment in sectors such as AI, life sciences and advanced batteries will be critical if the UK is to compete with the deep capital markets of the United States and retain its next generation of global technology champions.

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Government steps in with £25m investment to keep AI firms listed in London

Poundland has closed 149 stores and cut 2,200 jobs as part of a sweeping turnaround plan aimed at stabilising the business after a period of heavy losses and declining sales.

The discount retailer said the closures mark the final phase of a restructuring programme launched last year, following a collapse into the red that was blamed on weak trading conditions and an unpopular overhaul of its clothing ranges.

Poundland was bought for £1 from Pepco Group in June last year by US restructuring specialist Gordon Brothers, which has since pledged up to £80 million to revive the business.

As part of the reset, Poundland has refocused on its core proposition, with around 60 per cent of its range now priced at £1. The retailer is also relaunching its Pep & Co clothing label after sales were hit by a switch to ranges supplied by its former parent company.

Adult Pep & Co clothing will return to stores by the end of this month, with children’s and baby ranges due to follow in February.

The closures form part of a wider shake-up first announced last June after Poundland posted a £51 million pre-tax loss in 2024. Alongside store closures, the plan included rent reductions, the closure of distribution centres, the end of online sales, the scrapping of its Perks loyalty app and the withdrawal from frozen and most chilled food categories.

Poundland confirmed that its frozen and digital distribution centre in Darton, South Yorkshire, and its national distribution centre at Springvale in Bilston, West Midlands, have now closed. Two other distribution centres, in Wigan and Harlow, remain operational.

Despite the upheaval, the company reported signs of improvement. Underlying profits more than doubled to £17.3 million in the three months to 28 December compared with the same period a year earlier. The number of items sold rose by 2 per cent, although like-for-like sales at established stores fell 2.9 per cent, even after stripping out categories that are no longer sold.

Founded in 1990 with its first store in Burton upon Trent, Poundland has struggled in recent years amid rising business rates, energy and staffing costs, as well as intense competition from rivals including The Range, B&M, Savers and low-cost online platforms such as Temu and Shein.

The discount sector has already seen significant consolidation. Wilko collapsed in 2023, with its brand later acquired by The Range, while Poundstretcher was bought in 2024 by Fortress, owner of Majestic Wine. Poundworld shut its 350 stores in 2018, and Poundland previously acquired rival 99p Stores in 2015.

Barry Williams, managing director of Poundland, said the store closure programme was now complete and that early signs suggested the turnaround was gaining traction.

“We have clear indications from the work we’ve already done that we’re on the right track,” he said. “While there’s been significant progress as we re-focus and re-energise the business with lower prices and a sharper offer, we know we still have much to do.”

Williams said customers wanted a simpler proposition that delivered clear value. “That’s why our focus in 2026 will be on delivering the kind of ranges and price simplicity our customers want across the store — from clothing and homewares to our core grocery aisles,” he added.

Gordon Brothers said its planned £80 million investment would support Poundland’s recovery as it seeks to rebuild profitability in an increasingly competitive discount retail market.

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Poundland shuts 149 stores and cuts 2,200 jobs in £1 refocus turnaround

Scarlett Johansson and Cate Blanchett are among hundreds of actors, musicians and writers backing a new campaign accusing artificial intelligence companies of unlawfully exploiting creative work to train their systems.

The campaign, titled “Stealing Isn’t Innovation”, launched on Thursday with the support of around 800 creative professionals, including the band R.E.M. and bestselling author Jodi Picoult.

In a joint statement, the signatories accuse technology companies of using copyrighted material “without authorisation or regard for copyright law” to build commercial AI platforms.

“Artists, writers and creators of all kinds are banding together with a simple message,” the statement said. “Stealing our work is not innovation. It’s not progress. It’s theft — plain and simple.”

The campaign urges AI developers to pursue licensing agreements and partnerships with rights holders rather than scraping creative content from the open web. It also acknowledges firms that have already taken that approach. OpenAI, the developer of ChatGPT, has signed licensing deals with organisations including Disney and The Guardian, while Warner Music Group has reached an agreement with AI music generator Suno.

Despite these deals, copyright remains one of the most contentious issues in the AI boom. Large language models and image generators rely on vast datasets drawn from online text, images and audio to generate responses. Many creators argue this material is protected intellectual property and should not be used without consent or compensation.

AI firms, including OpenAI, have countered that using publicly available data falls under “fair use”, a doctrine in US law that permits limited use of copyrighted material without permission in certain circumstances. The argument is now being tested in courts, with dozens of lawsuits filed in the United States over the past two years.

Johansson has already found herself at the centre of the debate. In 2024, she accused OpenAI of using a voice that closely resembled her own for a ChatGPT assistant, saying she was “shocked, angered and in disbelief”. The company subsequently removed the voice.

Other high-profile supporters of the campaign include actor Joseph Gordon-Levitt, Breaking Bad creator Vince Gilligan and singer Cyndi Lauper. Gilligan previously described generative AI as “the world’s most expensive and energy-intensive plagiarism machine”.

The initiative has been organised by the Human Artistry Campaign, whose backers include the Writers Guild of America, the Recording Industry Association of America and actors’ union SAG-AFTRA, which went on strike in 2023 partly over concerns about AI use.

The debate is also intensifying in the UK. The government has faced criticism over proposals that would allow AI firms to use copyrighted material without prior permission unless creators explicitly opt out. The technology secretary, Liz Kendall, said this month that ministers were seeking a “reset” on the policy, with an official review expected to be published in March.

As AI adoption accelerates across media, entertainment and publishing, the campaign signals a growing push by creators to assert control over how their work is used — and to ensure that the next wave of technological innovation does not come at their expense.

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Scarlett Johansson and Cate Blanchett back campaign accusing AI firms of ‘theft’

The Bank of England is accelerating the expansion of its Leeds operation as part of a wider drive to cut costs, reduce headcount and overhaul its London estate.

Under new plans approved by the Bank’s court of directors, half of all external recruitment will now be based in Leeds, as governors push to meet a long-standing commitment to station 500 staff in the city by 2027 – roughly one in ten of the Bank’s total workforce.

Minutes from the court show that executive directors have been instructed to allocate 50 per cent of new hires to the northern hub in order to “further progress” the regional expansion, even as the institution pursues an ambitious cost-saving programme.

The move comes amid plans to slim down the Bank’s overall headcount and deliver operating cost savings of 8 per cent in the next financial year, in an effort to limit the growth of levies charged to the financial services industry.

The Leeds push has been in train since the Bank announced five years ago that it would establish a major northern presence. A larger office opened in the city in 2023, and expansion has been driven through a mix of voluntary relocations from London and local recruitment.

Progress has been slower than initially hoped. As of December 2024, only 156 London-based staff had expressed an interest in relocating, despite the Bank offering up to £8,000 in expenses to encourage moves. There are currently just over 200 Bank of England employees based in Leeds.

Governor Andrew Bailey has previously described the Leeds office as an opportunity to better reflect the communities the Bank serves and to broaden its talent pool beyond London.

The expansion in Leeds is also closely linked to a major internal transformation programme following an external review of the Bank’s forecasting and modelling capabilities, led by Ben Bernanke. Officials have described the reforms as the most significant shake-up of the institution since it was granted operational independence in 1997.

As part of the restructuring, staff have been invited to apply for voluntary redundancy under a “mutually agreed resignation” scheme aimed at delivering sustainable savings. Employees based in Leeds are exempt from the redundancy process.

At the same time, the Bank is preparing to consolidate its London footprint. It plans to vacate 20 Moorgate, the headquarters of the Prudential Regulation Authority since 2012, when the lease expires in 2028. Most staff will be relocated to the Bank’s historic Threadneedle Street site, which is undergoing extensive renovation.

Directors described the overhaul of the Bank’s estate as a “once in a generation opportunity” to improve both its premises and its geographical reach. However, they also warned of reputational risks associated with the redevelopment, stressing the importance of a robust business case and clear communication, given the historic significance of the Threadneedle Street building.

The court noted that any future expansion of the Bank’s workforce could be accommodated by further growth in Leeds rather than additional space in London.

The Bank of England first opened a branch in Leeds in 1827 and is now based at Yorkshire House, a refurbished 1937 building. The city was chosen for its strong financial and professional services sector, access to commercial real estate, large higher education base, and growing strengths in data, artificial intelligence and green finance.

A Bank of England spokesperson said: “Our UK footprint ensures we best represent the public we serve, build stronger links across the regions, and attract a wider pool of talented workers. Over the coming years, we plan to consolidate our London locations and, in the meantime, continue to expand our presence in Leeds.”

The shift underlines how the central bank is seeking to balance regional expansion with fiscal restraint, as it modernises its operations and responds to growing scrutiny of costs, governance and public accountability.

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Bank of England accelerates Leeds expansion as part of cost-cutting overhaul

Amazon is preparing to cut thousands more jobs as part of a sweeping overhaul driven by artificial intelligence and internal restructuring, according to reports.

The world’s largest retailer is expected to announce a second round of layoffs as soon as next week, following the removal of 14,000 white-collar roles in October. The latest cuts are expected to be of a similar scale, taking Amazon closer to its longer-term goal of shedding around 30,000 positions.

The company, founded in 1994 by Jeff Bezos, who remains executive chairman and its largest individual shareholder, employs around 1.58 million people globally. While the planned reductions represent a small fraction of its total workforce, they amount to almost 10 per cent of Amazon’s corporate staff.

According to Reuters, the cuts are expected to affect teams across Amazon Web Services, retail operations, Prime Video and the company’s human resources division, known internally as People Experience and Technology. Other business units could also be impacted.

Amazon previously linked the October job cuts to the rapid adoption of AI, telling staff in an internal memo that the technology represented the most significant shift since the advent of the internet, enabling companies to innovate at unprecedented speed.

However, Andy Jassy later played down the idea that the layoffs were primarily driven by cost pressures or AI alone. Speaking during the company’s third-quarter earnings call, Jassy said the reductions were more about organisational design.

“It’s culture,” he told analysts. “You end up with a lot more people than what you had before, and you end up with a lot more layers.”

Jassy has previously warned that Amazon’s corporate workforce would shrink over time as efficiencies gained from AI reduce the need for certain roles. Like many large technology companies, Amazon has been increasingly using AI to write software code and deploying so-called AI agents to automate routine tasks.

The company showcased a new generation of AI models at its annual Amazon Web Services conference in December, underlining how central the technology has become to its future strategy.

If confirmed, the latest reductions would mark the largest layoffs in Amazon’s three-decade history. The company previously cut around 27,000 jobs in 2022 as it adjusted to slowing growth following the pandemic boom.

Employees affected by the October round of layoffs were kept on the payroll for 90 days, during which they could apply for internal roles or seek work elsewhere. That period is due to expire on Monday, adding to expectations that a fresh wave of announcements is imminent.

The move highlights how even the biggest technology groups are reshaping their workforces as AI transforms how corporate functions operate — raising fresh questions about the long-term impact of automation on white-collar employment.

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Amazon set to cut thousands more jobs as AI overhaul accelerates

Juspay has secured $50 million in fresh funding from WestBridge Capital, valuing the business at $1.2 billion and strengthening its push to expand globally as demand for enterprise-grade payment infrastructure accelerates.

The Series D follow-on round comprises a mix of primary and secondary investment. The secondary element provides liquidity for early backers and employees holding ESOPs, marking the second such liquidity event the company has facilitated in the past year.

The funding comes after a year of strong growth for Juspay, with annualised total payment volume now exceeding $1 trillion. The company processes more than 300 million transactions a day for a roster of global clients including Amazon, Google, HSBC, Agoda, Flipkart, IndiGo, Swiggy, Zepto and Zurich Insurance.

Juspay has steadily expanded beyond its home market and now operates across Asia-Pacific, the Middle East, Latin America, Europe, the UK and North America. The company positions itself as a foundational payments infrastructure provider, building modular, interoperable and open-source systems designed to serve merchants, banks and payment networks at scale.

The latest investment will support Juspay’s continued international expansion and further development of its platform, including advances in artificial intelligence aimed at improving workforce productivity and enhancing merchant experience.

Sheetal Lalwani, co-founder and chief operating officer of Juspay, said the funding reflected the company’s long-term approach to solving complex problems in global payments.

“Our focus over the last decade has been on solving the core complexities of global payments through first-principles engineering and design,” Lalwani said. “As we scale globally, this round reflects our growth and provides liquidity for early investors and team members who have been part of the journey. We are pleased to welcome WestBridge Capital as a partner as we build the next generation of payments infrastructure.”

WestBridge Capital said its conviction in Juspay was rooted in the company’s ability to evolve alongside the payments ecosystem. Deepak Ramineedi, partner at WestBridge Capital, said Juspay had consistently stayed ahead of industry shifts.

“They have evolved from a payment orchestration platform to a full-stack UPI platform, and now to a core payments infrastructure provider for banks,” he said. “Their focus on deep-tech innovation, combined with sustainable and profitable growth, differentiates them in the fintech space.”

The investment underlines growing global appetite for robust, scalable payment infrastructure as digital commerce volumes surge worldwide. With total funding now approaching $300 million, Juspay is positioning itself as a critical backbone for the next phase of global digital payments growth.

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Juspay raises $50m at $1.2bn valuation to accelerate global payments expansion

Preply has raised $150 million in a Series D funding round led by WestCap, valuing the global language learning marketplace at $1.2 billion and marking its transition into unicorn territory.

The round, for which Goldman Sachs International acted as sole placement agent, will be used to accelerate product development, expand Preply’s AI and data capabilities and fuel international growth as the company seeks to reshape education through personalised, tutor-led learning supported by artificial intelligence.

Founded as an online language tutoring marketplace, Preply now connects more than 100,000 tutors with learners in 180 countries, offering one-to-one lessons across more than 90 languages. Its model blends human instruction with an AI-powered tutoring co-pilot designed to track progress, surface insights and automate administrative tasks, allowing tutors to focus on teaching and learners to progress faster.

The funding comes amid strong growth in global demand for language learning. According to data from HolonIQ, around 1.8 billion people worldwide are currently working towards proficiency in a second language. The global direct-to-consumer language learning market is forecast to reach $227 billion by 2035, following threefold growth over the past five years.

Since its Series C round, Preply has more than tripled the number of bookable tutors on its platform and expanded its offering by adding more than 40 new languages. Over the past year, the company has continued to improve profitability and has become EBITDA positive.

Alongside WestCap, the round was supported by existing investors including the European Bank for Reconstruction and Development and Horizon Capital. WestCap’s team, which has previously backed and scaled global marketplaces such as Airbnb and StubHub, will work closely with Preply as it enters its next phase of growth.

Kirill Bigai, co-founder and chief executive of Preply, said the investment underlined the company’s belief that the future of education lies at the intersection of human connection and AI.

“We feel extremely fortunate and deeply responsible for shaping how people will learn in the future,” Bigai said. “We connect learners with the world’s best tutors, amplified by AI, bringing learning efficiency to a level that was previously unreachable. This partnership will help us continue to innovate and create opportunities for people everywhere to progress in their lives.”

Preply said it would use the fresh capital to expand its product and engineering teams, deepen its AI-driven personalisation and accelerate global expansion to reach more learners and tutors. The company is positioning itself against fully automated learning platforms by doubling down on human-led instruction, using AI as an enabler rather than a replacement.

Research published in Preply’s 2025 Efficiency Study, conducted with LeanLab Education, found that 96 per cent of learners believe real conversations with human tutors are essential to their progress, while 97 per cent said such interactions were key to building confidence. The study also found learners progressed up to three times faster on Preply compared with average benchmarks, with one in three advancing a full CEFR level within 12 weeks.

Allen Mask, a partner at WestCap and former senior executive at Airbnb, who will join Preply’s board, said the platform was setting a new benchmark for personalised education at scale.

“Learners thrive when real human instruction is supported by technology,” he said. “Preply has the market-leading product, experienced leadership and vision to shape how people communicate globally.”

The Series D brings Preply’s total funding to around $299 million to date, reinforcing investor confidence in its growth trajectory. With a growing global footprint and a focus on measurable learning outcomes, the company says it is well positioned to cement its role as a category leader in human-led, AI-enabled education.

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Preply raises $150m at $1.2bn valuation to scale human-led, AI-enhanced learning

Labour has been urged to stop workers accessing their private pensions from the age of 55 in an effort to curb early retirement and tackle rising unemployment, according to a leading think tank.

The Resolution Foundation, which has close links to senior Labour figures, said current pension and tax rules encourage wealthier workers to leave the labour market years before state pension age, worsening labour shortages and weakening the public finances.

Under existing rules, savers can draw on their private pension from age 55, 11 years before the state pension age, which is due to rise from 66 to 67 this year. Up to a quarter of a private pension, capped at £268,275, can be taken tax-free from that point.

In a new intervention, the think tank said ministers should consider limiting access to private pension wealth before state pension age, either by raising the minimum access age or by reducing the amount that can be withdrawn tax-free.

“To reduce the financial incentives for people to retire early, the Government should consider limiting access to private pension wealth before the state pension age,” the foundation said. “This could be done either by raising the age at which tax-relieved private pension wealth can be accessed or by reducing the amount that is tax-free.”

The call comes amid signs of a weakening labour market. Figures from the Office for National Statistics show the UK unemployment rate has climbed to 5.1 per cent, up from a post-pandemic low of 3.6 per cent in 2022. The Resolution Foundation said the rise has been driven largely by people under 25 and over 50 leaving or failing to enter work.

Employment rates among so-called “prime-age” workers in the UK remain comparable with high-employment European economies such as Denmark, Germany and Norway, but Britain lags behind when it comes to keeping older workers in jobs.

Data cited by the think tank shows that by age 55, around a quarter of people in Britain are not in employment. That figure rises to more than a third by age 60 and over half by 64. At the current state pension age of 66, only 30 per cent remain in work.

Among people aged 50 to 65 who are not working, 41 per cent cite sickness or disability as the main reason, while 31 per cent say they are retired. A further 12 per cent are home-makers and 6 per cent are unemployed and actively seeking work.

The minimum age for accessing private pensions is already scheduled to rise to 57 from April 2028, a change the Resolution Foundation itself recommended in a post-pandemic report in 2023. The think tank now suggests further reform may be needed.

Nye Cominetti, an economist at the Resolution Foundation, said generous tax reliefs were distorting behaviour at the top end of the income scale.

“Our pensions and tax rules currently incentivise very wealthy people to retire early,” he said. “These generous tax breaks should be restricted. By doing so, the Government can boost both employment and the public finances.”

“The UK does reasonably well on its overall employment rate compared with other rich countries,” he added, “but trails the best-performing nations when it comes to the share of people over 50 in work. The Government should offer a mix of carrots and sticks to improve their job prospects.”

The foundation noted that UK unemployment is now close to the European Union average of 6 per cent for the first time since the euro was launched in 2002, suggesting the problem is largely domestic rather than driven by global conditions.

Some countries have already gone further. Denmark, often cited as a high-employment economy, has linked its state pension age to life expectancy, meaning workers must now wait until age 70 to receive payments. The UK state pension age is scheduled to rise to 68 by 2042, fuelling speculation that future governments could adopt a similar approach.

Despite incentives to retire later, the number of pensioners still working has been rising as cost-of-living pressures bite. More than 1.5 million people over the state pension age are now in employment, according to estimates from HM Revenue & Customs, based on the latest Survey of Personal Incomes. Around 1.56 million over-65s are on payrolls, a 12 per cent increase compared with 2020–21, while 562,000 pensioners were self-employed in 2024–25.

A Treasury spokesperson said the government remained focused on retirement security, pointing to its commitment to the triple lock, which it said was worth £470 a year to recipients of the new state pension.

“We have also launched a pensions commission to look at what more is required to ensure the pensions system is strong, fair and sustainable,” the spokesperson added.

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Labour urged to raise private pension access age to curb early retirement

Apple is developing a wearable “AI pin” capable of listening to conversations and responding to spoken commands, as the iPhone maker looks to regain momentum in the fast-moving artificial intelligence race.

The disc-shaped device, which would be equipped with speakers, microphones and cameras, is at an early stage of development but could eventually go on sale later this decade. According to reports, the wearable would be designed to clip onto clothing or be worn as an accessory, allowing users to interact with AI without taking out their phone.

The project was first reported by The Information, which said Apple is exploring a standalone product or a companion device for future smart glasses. Internal estimates suggest Apple could manufacture up to 20 million units when the product eventually launches, though it is not expected before 2027.

The prototype device is understood to include three microphones, pointing to a strong focus on accurately capturing voice commands, as well as a physical button. Some AI wearables are activated manually, while others continuously monitor surrounding conversations, a distinction that could prove sensitive for a company that has long positioned privacy as a core brand value.

Any always-listening device would present a challenge for Apple, whose chief executive Tim Cook has repeatedly emphasised user privacy as a competitive advantage. Apple’s existing products, including the iPhone and Apple Watch, already use microphones that activate when users say “Hey Siri”, but a dedicated listening wearable could attract far greater scrutiny.

The move would also represent an attempt to revive Apple’s faltering AI ambitions. The company has repeatedly delayed a major upgrade to Siri intended to rival conversational chatbots such as ChatGPT and Gemini. Apple recently struck a deal with Google to integrate Gemini into Siri, and is expected to overhaul the voice assistant later this year so it can handle more fluid, chatbot-style conversations, according to Bloomberg.

Apple is not alone in exploring AI-first hardware. A growing number of technology companies are searching for a post-smartphone interface powered by artificial intelligence. Meta has embedded AI into its smart glasses, while Amazon has acquired Bee, a start-up behind a listening wristband designed to capture and summarise conversations.

Elsewhere, Sir Jony Ive has joined OpenAI to develop a new generation of AI-powered devices, which could be unveiled as soon as this year, putting additional pressure on Apple to respond.

Not all experiments in the category have succeeded. Last year, Humane, a company founded by former Apple employees, halted production of its own AI pin after weak sales and heavy criticism. The $700 (£521) device was widely panned for poor performance, and the start-up behind it was later sold.

Apple declined to comment on its plans. However, the reported work underscores how intensely Big Tech is competing to define the next major consumer device — and how artificial intelligence, rather than touchscreens, may sit at the centre of that future.

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Apple explores wearable ‘AI pin’ that could listen to conversations

UK businesses are being urged to tighten controls around their use of artificial intelligence in 2026, as legal experts warn that poorly governed AI systems are exposing companies to mounting legal, financial and reputational risks.

From unclear ownership of AI-generated content to data protection breaches and misleading outputs, advisers say many organisations have adopted AI tools faster than they have put safeguards in place, leaving them vulnerable as regulation accelerates.

Copyright and ownership disputes remain unresolved

One of the most pressing risks for businesses using generative AI is uncertainty around copyright and ownership of AI-generated outputs. Legal experts warn that AI tools can unintentionally reproduce copyrighted material, creating disputes over who owns, or is liable for, the content produced.

A high-profile example is the case of Getty Images versus Stability AI, which highlighted the legal grey areas surrounding AI training data. Getty alleged that its copyrighted images had been used without permission to train an image-generation model. While Getty’s main UK copyright claim did not succeed, the court found limited trademark infringement linked to early outputs that reproduced Getty watermarks, underlining the legal uncertainty businesses still face.

Lawyers say companies should carefully review the licensing terms of any AI tools they use, implement internal review processes to check outputs for potential infringement, and clearly define ownership rights in contracts. Commercial use of AI-generated content is particularly risky where training data sources are opaque.

AI ‘hallucinations’ pose serious business risks

Accuracy remains another major concern. Studies suggest that around 20 per cent of AI-generated outputs contain significant errors, including fabricated or outdated information. When relied upon for legal, financial or operational decisions, these so-called “hallucinations” can expose businesses to misrepresentation claims, regulatory penalties and reputational damage.

In March 2024, a chatbot powered by Microsoft was reported to have given incorrect legal guidance to business owners, including advice that could have led to breaches of employment law. Legal experts warn that similar errors could result in fines of up to €7.5 million (£6.5 million) for providing misleading information to regulators.

To mitigate the risk, businesses are advised never to treat AI as a final authority. Human verification should be mandatory for high-stakes decisions, with clear disclosure when content has been AI-generated.

Weak AI governance is a growing liability

Many organisations have rolled out AI tools without establishing internal governance frameworks, a gap advisers describe as a “ticking time bomb”. Without clear policies, employees may misuse AI systems, input sensitive data, or fail to recognise harmful or biased outputs, increasing the risk of data breaches and legal claims.

Legal specialists recommend introducing company-wide AI policies that define acceptable use, establish review protocols and assign accountability for decisions informed by AI. Treating AI as a regulated business tool rather than a productivity shortcut is increasingly seen as essential.

Data protection breaches carry heavy penalties

AI systems often process vast quantities of personal data, including customer and employee information. Using this data without proper consent, transparency or anonymisation can lead to serious breaches of data protection law, resulting in fines and loss of trust.

Businesses are being urged to minimise data collection, document lawful bases for processing, maintain clear consent records and ensure transparency around how AI systems handle personal information.

Regulation is evolving faster than many businesses expect

Perhaps the biggest challenge for 2026 is the pace at which AI regulation is changing. Governments are introducing new rules that can apply across jurisdictions and, in some cases, retrospectively to systems already in use.

Legal experts warn that companies failing to monitor regulatory developments or audit their AI systems regularly risk falling foul of the law even when acting in good faith. Flexible compliance strategies and ongoing legal oversight are increasingly seen as essential as AI moves from experimentation to core business infrastructure.

The message from advisers is clear: AI remains a powerful competitive tool, but in 2026 it also represents a growing legal exposure. Businesses that fail to embed governance, oversight and compliance into their AI strategy may find the technology creates more problems than it solves.

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Legal experts warn UK firms of rising AI risks in 2026 as regulation tightens