Microsoft: Sluggish AI adoption could cost the UK economy £150 billion

UK map concept art showing digitized UK landmass outline in blue.
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AI and cloud technology could increase the UK's GDP by £550 billion over the next 10 years providing the country deals with certain bottlenecks, according to Microsoft.

Produced for the company by independent consultancy Public First, the report suggests that prompt investment in digital technologies and skills could have an average societal return on investment (ROI) of more than 5:1 by 2025.

Conversely, delays to AI roll-outs over the next five years could cost the UK £150 billion by 2035.

"The UK risks foregoing significant economic gain if we let progress slip over the next five years," said Hugh Milward, vice president for corporate, external and legal affairs at Microsoft.

"Planning, power, and permitting are critical to unlocking the sector’s ability to invest quicker and make the most of the opportunity for the UK."

Infrastructural issues were identified as the first key bottleneck in the report, which found that the UK has poorer capacity than other countries with just 1.3% of global computing capacity.

Meanwhile, commercial awareness was also flagged as an issue, with almost a third of SMEs revealing they have yet to shift to the cloud. Similarly, nearly half are still to adopt AI tools or applications in the workplace.

The third bottleneck identified by the report is a lack of skilled staff, with two-fifths of businesses struggling to find workers with good digital skills, particularly in traditional digital roles such as data analytics or IT.

In addition, the need for workers with new AI-specific skills, such as prompt engineering, is likely to rise. It will be essential to offer retraining and upskilling opportunities in AI-related fields over the next decade, the report found.

Microsoft, of course, believes it has the solutions. Last year, it announced a £2.5 billion investment in AI skills, security, and data center infrastructure across the country. As part of the move, the tech giant said it plans to procure more than 20,000 of the most advanced graphics processing units by 2026.

At the same time, the government invested £1.5 billion in computing capacity and committed to building three new supercomputers by 2025.

A key takeaway from the report centered around the use of AI in the public sector.

Microsoft said the strategic use of the technology could save the public sector £17 billion by 2035, with the projected benefits of AI on public sector occupations only around 15% less than for roles in the private sector.

No widespread AI job losses expected

The report is optimistic when it comes to AI skills, finding that the technology is unlikely to create unemployment in the short-to-medium term, but could instead make individual workers more productive, and lead to new employment opportunities.


Contrary to common fears, the report concluded that AI could help employees at the bottom or middle end of the wage distribution table to catch up with higher earners.

However, the UK will have to deal with relatively low levels of compute capacity, significant delays in building new infrastructure, and a long tail of SMBs who haven't yet fully adopted key background technologies such as cloud.

"The next five years are likely to be the most important for putting in place the right enablers to ensure the UK can take full advantage of AI," it said.

Emma Woollacott

Emma Woollacott is a freelance journalist writing for publications including the BBC, Private Eye, Forbes, Raconteur and specialist technology titles.