AI could boost UK GDP by £550 billion by 2035, research shows

The UK could make more than half a trillion pounds in the next decade by embracing AI and cloud technology, according to a new report commissioned by Microsoft. AI represents a £550 billion opportunity for the UK over the next 10 years, as revealed in a new report commissioned by Microsoft.
Independent consultancy  Public First  used comprehensive data-modelling techniques and extensive surveys of more than 1,000 senior business decision makers to create the report,  Unlocking the UK’s AI Potential .
The findings predict multiple ways that AI could boost the UK economy, if the country steps up its AI journey. The report also estimates that prompt investment in digital technologies and skills could have an average societal Return on Investment (ROI) of more than 5:1 in the next decade – meaning that for every extra £1 spent by companies, the economy could grow by £5.
With the most advanced tech sector in Europe – second globally only to the US – the UK is well set up for AI leadership. In 2021, the UK Government launched the  National AI Strategy , a 10-year action plan to make the UK an ‘AI superpower’. Digital technology is already one of the biggest drivers of UK growth and the country has attracted more than £20 billion in private investment in AI since 2016.
But the report suggests that delaying AI roll-out over the next half decade could cost the UK £150 billion by 2035.
Hugh Milward, Vice President for Corporate, External and Legal Affairs at Microsoft, says: “The UK risks foregoing significant economic gain if we let progress slip over the next five years.
“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.”
To maintain momentum on AI adoption, the UK will need to take action on key bottlenecks.
Bottleneck 1: Infrastructure
The UK’s digital technology infrastructure is less advanced than many other countries. As of 2022, the UK had just 1.3% of global computing capacity. Staying at the forefront of the fast-changing AI market will require substantial resources and capabilities, including adequate datacentre infrastructure and a dependable supply of powerful GPU computer chips.
The report finds that almost a third (31%) of SMEs (small and medium sized enterprises) are yet to adopt the cloud and almost half (47%) do not currently use AI tools, applications, AI robotics or machinery. To harness AI’s potential, businesses will need to become more familiar with digital technology.
Bottleneck 2: Commercial awareness
The report finds that almost a third (31%) of SMEs are yet to adopt the cloud and almost half (47%) do not currently use AI tools, applications, AI robotics or machinery. To harness AI’s potential, businesses will need to become more familiar with digital technology.
Bottleneck 3: Skills shortage
Two-fifths of businesses struggle to find staff with good digital skills, according to the research, with shortages 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 finds.
How can we ensure these bottlenecks are addressed to harness the full potential of AI?
Securing the UK’s AI future
Microsoft announced a £2.5 billion ($3.2bn) investment in AI skills, security and datacentre infrastructure in 2023, aiming to procure more than 20,000 of the most advanced GPUs [Graphics Processing Units] by 2026. By more than doubling its datacentre infrastructure across the UK, with the biggest investment in its 40-year history in the country, Microsoft will help to support UK momentum in the AI era.
The Government simultaneously invested £1.5bn in computing capacity and committed to building three new supercomputers by 2025.
Setting new standards for the public sector
While the discourse around AI often hinges on private business, economic gains and digital innovation will have genuine, positive effects on real lives, the report says. This will perhaps be most significant in the public sector, which currently faces huge pressures on resources.
The report reveals that strategic use of AI could save the UK’s public sector £17 billion by 2035 – enough to pay the salaries of more than 330,000 nurses.  What’s more, the projected enhancement benefits of AI on public sector occupations are only around 15% less than for roles in the private sector.
AI is already helping to support earlier cancer and disease detection in the NHS. Not only could this save the NHS an additional £500 million by 2030, but it would transform outcomes for patients and families.
Levelling up the workforce with AI skills
While headlines are sometimes dominated by fears that AI will steal or negatively alter jobs, the report argues that AI is unlikely to create unemployment in the short-to-medium term. Instead, AI could not only help make individual workers more productive, but also offer many people an upskilling or new employment opportunity.
It is likely there will be job opportunities around new AI products and services, as well as in burgeoning AI-related fields, such as data and prompt engineering. Even between 2020 and 2023, demand for AI roles grew by twice as much as the average labour demand.
Contrary to common concerns that AI will have a disproportionately negative impact on lower-income workers, the report suggests that actually AI could help employees at the bottom or middle end of the wage distribution table to catch up with higher earners.
To help enhance the workforce, Microsoft UK has made a multi-million-pound investment to train one million people with the skills they need to work with AI.
There are key employment areas where the UK is especially well-suited to using AI, notably in financial services, professional services, health, biotech and science.
Supporting AI advances in such fields could not only lift the UK economy but also benefit society. In one recent example, Microsoft and research laboratory PNNL used a combination of AI and high-powered computing to discover a new type of battery material in just weeks, rather than the predicted years.
Empowering the UK to fulfil its AI potential
The impact of generative AI has been compared to the Industrial Revolution, but at a much faster pace and at much greater scale. The UK must act assertively or risk being left behind, the report concludes.
Microsoft is committed to helping the country realise its ambitions and become an AI superpower, potentially unlocking transformative benefits for the economy, public services and society at large.
Read more:
AI could boost UK GDP by £550 billion by 2035, research shows