AI Growth Lab: UK champions AI innovation with regulatory sandbox proposal

22 October 2025

On 21 October 2025, the UK Government opened for consultation their proposal for a UK AI Growth Lab. The Government is seeking to rely on a sandbox-based model to ensure that laws continue to keep pace with rapid AI development while ensuring effective regulatory oversight.

Similarly to the emergence of Japan's recent AI Promotion Act, this proposal is aimed at creating an AI-friendly regulatory landscape which is supportive of both innovation and responsible AI development. This differs significantly from the primarily risk-oriented approach seen in the European Union, but also from the entirely regulation-free approach being pursued by the US Federal Government.

The proposal arrives against the backdrop of the Government's ambitious target to reduce administrative burdens of regulation on business by 25% by the end of the Parliament. On the same date as the AI Growth Lab proposal, the Government also published a questionnaire asking UK businesses to identify the regulations that are current barriers to their growth and innovation. In this questionnaire, the Government is “interested in radical solutions to remove or simplify regulations (including through AI and digital technology).”

Real regulatory consequences

One of the key outcomes of the proposed sandboxing exercise would be the permanent modification of existing laws to enable AI innovation in a more effective but still responsible way, following pilots that are subject to careful monitoring and supervision. The Government suggests that evidence from successful pilots could be used not only to identify the regulations that need updating, but also to justify streamlined powers for making changes permanent, as opposed to following existing legislative processes which would take considerably longer.

What makes the UK approach particularly innovative is that this sandbox will not only be aimed at testing the approach of AI developers, but also the thinking of UK regulators. In other words, the UK is proposing sandboxing legal interpretations of existing laws being applied to AI. The Government is seeking to test the regulators themselves, so that if their interpretation of the law is too cumbersome, this can be ironed out through subsequent legislation. It is not simply pursuing aggressive deregulation but focusing on where the unnecessary impediments might be, so that they can be corrected.

A broad cross-sector approach

While sector-specific innovation sandboxes are already in operation in the UK, such as the MHRA AI Airlock for medical devices innovation, this proposal acknowledges that transformative AI demands a cross-economy approach.

For example, AI products and services that may interface with healthcare systems, autonomous vehicles and AI-augmented professional services currently need to navigate restrictions across several regulatory frameworks, and engage with several different regulators. A cross-economy sandbox is intended to streamline the approach to making targeted modifications to regulations across all sectors.

The proposal also confirms that applications to participate in the sandbox would be sought from businesses of all sizes, from start-ups to public sectors innovators, to established FTSE companies and global AI developers alike.

Although this is the wider vision of the proposal, the Government has asked for input from businesses on the industries it should prioritise first, where the AI Growth Lab would have the largest and most immediate impact on innovation.

Scope for businesses to shape the framework

While the Government’s objectives of growth and innovation are clear, the proposal leaves the exact shape and scope of the AI Growth Lab still very much to be decided.

The proposal puts forward for consultation two very different potential sandbox models:

A centralised government-operated lab working with an Oversight Committee made up of sector regulators.
Regulator-operated labs where a lead regulator would be appointed for each sandbox based on their existing regulatory remit, with regulatory consortiums to be formed where there are cross-sector AI applications.

These models are markedly different and underline the significant scope for the Government still to determine the direction of the proposal, in consultation with UK businesses.

The Government has also asked for input on a range of other features that will shape how the AI Growth Lab operates, including:

Which sectors or AI applications should be prioritised.
The appropriate length for the sandbox.
How oversight of the sandbox should be carried out.
What criteria should determine which organisations or projects are eligible to participate.
Whether a successful pilot in the AI Growth Lab would justify streamlined powers for making changes permanent.
Whether any lessons have been learned from participants in other UK regulatory and advisory sandboxes (e.g. FCA’s Innovate Sandbox or the ICO’s Data Protection Sandbox).

This provides an opportunity for businesses to be able to have a steer on the future regulatory landscape for AI development in the UK.

Ultimately, the Government’s proposal makes clear that the AI Growth Lab is intended to have a lasting impact on regulation across all sectors of the UK economy, paving the way for a widely reformed regulatory framework applicable to AI.

The AI Growth Lab consultation is open until 2 January 2026.

Authored by Eduardo Ustaran, Dan Whitehead and Bella Sharif.