The United States has put on hold a flagship £31bn package of technology investment and cooperation agreed with the UK during Donald Trump’s state visit earlier this year, in a move that UK officials acknowledge was communicated to London last week and which raises fresh questions over the direction of wider trade talks.

The decision to pause the “Tech Prosperity Deal” — a set of commitments intended to deepen UK-US collaboration on artificial intelligence, quantum computing and civil nuclear technologies — is being treated in Whitehall as part of a broader negotiating push by Washington, after months of slow progress on other areas of the UK-US trade agenda. Ministers have sought to play down the immediate impact, but the move lands as a political setback for Sir Keir Starmer, who presented the agreement in September as evidence of a strengthened “special relationship” and a route to growth-led investment across the UK.

According to reporting by the Financial Times, later confirmed by Reuters, British officials said the US administration had suspended the deal during a visit to Washington by the Business and Trade Secretary, Peter Kyle. The Science Secretary, Liz Kendall, was also in the US last week for meetings with technology firms and US counterparts, with discussions expected to continue into the new year.

At the centre of the dispute is Washington’s frustration with what it describes as “non-tariff barriers” — a catch-all for UK rules and taxes that affect market access beyond headline customs duties. US officials have raised concerns about the UK’s digital services tax, a 2% levy on the UK revenues of large technology companies, and about British food safety rules that restrict certain agricultural imports.

The Guardian reported that the Trump administration was unhappy that the UK continues to levy the digital services tax on American firms and has maintained a food safety regime that has long blocked controversial products. Any decision to weaken those standards could reopen a politically charged debate in the UK over issues such as chlorine-washed chicken and hormone-treated beef.

Starmer has resisted US pressure to scrap or significantly amend the digital services tax, which raises about £800m a year. While ministers have previously explored options to redesign the tax, it remains in place. At the same time, the Government has repeatedly said it will not dilute food and farming standards, a pledge that has become a fixed point in domestic politics as well as in trade negotiations.

The Tech Prosperity Deal was unveiled during Trump’s September visit, which included high-profile events and a public signing ceremony designed to showcase renewed cooperation. The technology package was billed at £31bn, driven by a series of corporate commitments, including a widely cited £22bn investment plan from Microsoft and £5bn from Google, alongside other pledges involving AI infrastructure and research partnerships.

The UK also promoted the creation of an artificial intelligence “growth zone” in the north-east of England, which ministers said could attract up to £30bn in investment and create around 5,000 jobs over time. Supporters have argued that a concentration of data centres, compute capacity and research programmes could anchor regional regeneration; critics have cautioned that investment headline figures can include a mixture of planned spending, partner contributions and longer-term projections rather than guaranteed new cash.

One complicating factor is that the text of the agreement itself was framed as conditional. The Guardian reported that the deal would “become operative” only alongside “substantive progress” in formalising and implementing it, language that gives Washington scope to link technology cooperation to outcomes elsewhere in the trade relationship.

The pause comes as both sides continue to negotiate a broader set of issues, including tariffs and sector-specific access. UK officials discussed whisky and steel tariffs and collaboration on critical minerals during last week’s Washington meetings, according to the Guardian, with further talks due in January.

A UK government spokesperson said: “Our special relationship with the US remains strong and the UK is firmly committed to ensuring the Tech Prosperity Deal delivers opportunity for hardworking people in both countries.” US officials did not immediately provide an on-the-record response in the reports carried by Reuters.

Privately, British officials have sought to frame the development as familiar negotiating pressure rather than a definitive rupture. One government source, quoted by the Guardian, described it as “hardball negotiations”, arguing that similar agreements have previously been paused and revived before final terms were agreed.

Even if the suspension proves temporary, it underlines how quickly a high-profile technology pact can become entangled in wider trade disputes — and how exposed both governments are to domestic red lines on tax, regulation and food standards, just as they attempt to present closer ties as a straightforward economic win.