The effect of Artificial Intelligence on the UK Economy and International Trade

The effect of Artificial Intelligence on the UK Economy and International Trade
29 Oct 2017

Artificial intelligence (AI) can transform the productivity and GDP potential of the UK landscape. But, we need to invest in the different types of AI technology to make that happen.

Research shows that the main contributor to the UK's economic gains between 2017 and 2030 will come from consumer product enhancements stimulating consumer demand (8.4%). This is because AI will drive a greater choice of products, with increased personalisation and make those products more affordable over time.

Labour productivity improvements will also drive GDP gains as firms seek to "augment" the productivity of their labour force with AI technologies and to automate some tasks and roles. 

There will be significant gains across all UK regions, with England, Northern Ireland, Scotland and Wales seeing an impact from AI in 2030 at least as large as 5% of GDP.

The value of AI is in enhancing and adding to what businesses can do now is large, if not larger than the impact of automation. It shows how big a game changer AI is likely to be – transforming businesses, people’s lives and society as a whole.

But, for the UK to benefit fully, the following is required::

  • Create the right environment for existing and new businesses to innovate and make the most of the product, productivity and wage benefits that this technology can bring.

  • Look at how to obtain the right talent, technology and access to data to make the most of this opportunity. To meet this challenge, there needs to be even more innovative ways in developing technology skills in the UK.

  • Make sure that AI systems are adopted responsibly and that every part of society can reap the benefits. One AI Responsibility Report warns that effective controls need to be built into the design and implementation phase, so AI’s positive potential is secured. This will also address stakeholder concerns about it operating beyond the boundaries of reasonable control.

There will be significant gains as a result of AI across all UK regions. 

The larger total impact on GDP in some UK regions reflects the different trade patterns in each of the countries. England, and to some extent Scotland and Wales, have stronger trade links with Europe and the rest of the world. The gains through trade related to artificial intelligence are likely to put even higher upwards pressure on GDP in these countries by 2030.

The Department for International Trade remains optimistic about the future of AI in the UK. Earlier this year, the UK Government announced a large-scale review into AI as part of the government’s five year Digital Strategy in order to identify the critical elements required  for the technology to thrive and grow on the UK.

Led by Professor Dame Wendy Hall of the University of Southampton, as well as Jérôme Pesenti, the CEO of BenevolentTech, it aims to consider the ways in which the state and industry could collaborate to back the technology and eventually inform a sector deal.

The Government has also announced an additional £17.3m funding boost from one of the UK’s Research Councils—the Engineering and Physical Sciences Research Council—for UK Universities to support the development of new AI technologies.

The Secretary of State for Business, Energy, and Industrial Strategy, Greg Clark, recently argued that “Investment in robotics and artificial intelligence will help make our economy more competitive, build on our world-leading reputation in these cutting-edge sectors and help us create new products, develop more innovative services and establish better ways of doing business.”

AI represents a significant business opportunity for the UK. “The UK Government is taking a leading role in getting the balance right, and our approach to this challenge will influence how the UK AI industry develops and the speed of disruption,” Mark Beresford argues. He believes that the workforce will quickly adapt: “Fortunately, the UK has an extremely flexible labour force, which is comfortable with the adoption of new technologies, having already transitioned to a more flexible and dynamic [post-industrial] model.”

“British companies and experts will help solve some of the world’s most difficult challenges in the fields of healthcare, medicine, the environment, transportation, infrastructure, and security, to name but a few.”

“The UK’s recognised strengths in attracting and cultivating world class talent to work on these problems in our Universities, combined with our unique innovation ecosystem which brings together ‘unusual suspects’ to create and develop new business models across technology and industry sectors, will help us to realise this opportunity on a global stage.”

The UK AI market is forecast to grow significantly in the next ten years—roughly £650 billion by 2025, according to a report by Accenture. Mark argues that this will attract international companies and capital to invest in innovative new start-ups and to expand their business operations from the UK, in part thanks to national incubators and accelerators such as Entrepreneur First, which have produced a stream of new AI companies that are attracting global investment capital. Furthermore, “global technology giants like Google (Deep Mind), Microsoft (SwiftKey), Twitter (Magic Pony), and Softbank (Improbable) have already made significant investments in UK AI companies to scale their own platforms.”

Alongside the market opportunities available in the UK, he sees the presence of some of the world’s strongest AI university research groups as equally important. This includes Cambridge, Oxford, Edinburgh, and UCL. “This strong university research base supports the growth of the next generation of scientists and engineers, and this is complemented by an increasing amount of AI related vocational skills development and apprenticeship opportunities.” New UK AI companies that began life in universities include Diffblue (University of Oxford), which uses AI to check for errors in source code, and Cytora (University of Cambridge), which specialises in AI driven data analytics for the insurance industry. 

The British tech sector has always been well connected globally. “The scale of business opportunity is global,” he argues. “We know that international clients and policymakers across Asia, the Middle East, Europe, and the US are already hungry to learn from UK AI experts.” He believes that AI ‘certainly’ represents a new opportunity to help UK companies develop even stronger international partnerships. “UK AI companies operate in a wide variety of industry verticals, and have developed solutions in different functional areas such as sales and marketing, operations and supply chain, human resources and finance.”

“the Asian markets, in particular Japan and South Korea, with their ageing populations and imperative to enhance productivity to stay competitive, will be attractive to UK companies.” This is reflected in the Department’s support for B2B matchmaking ‘Mega-Missions’ to Japan, South Korea, and Malaysia. “The interest from local partners has been exceptionally high, and new business wins have already been bagged by some of the UK participants.”

The Department are currently evaluating options for a similar high-profile AI initiative in the US in 2018, where UK firms are already making ground. “The US market will always be challenging for UK companies, but with dedicated support from the Department for International Trade’s US team, we are already seeing traction across the US in industries like financial services, healthcare, retail, cyber security, oil and gas, and manufacturing, where the UK has recognised strengths.”