Gearing up to realise AI’s productivity gains

Artificial intelligence once more grabbed the headlines in November when the UK government hosted the first international AI safety summit. Attracting political and business leaders from across the globe, it generated warnings aplenty about threats to security, privacy, employment and even the continued existence of humanity itself, reports David Sapsted.

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Away from the conference, though, the focus on AI’s future in the UK tended to be more prosaic. True, Prime Minister Rishi Sunak announced the creation of an AI safety institute, but he also unveiled a £100 million fund to finance research into how the technology could foster new medical treatments.In the Autumn Statement in late November, Chancellor of the Exchequer Jeremy Hunt pledged an extra £500 million in AI funding – on top of the £1.5 billion already promised – to "help make us an AI powerhouse". He told MPs: “When it comes to tech, we know that AI will be at the heart of any future growth. I want to make sure our universities, scientists and start-ups can access the compute power they need."For businesses large and small in all sectors, the focus is increasingly turning to how AI might solve one of the UK’s most perplexing and most persistent problems: the so-called ‘productivity puzzle’ which, for years, has dogged the nation’s economic fortunes.Although the UK remains the world's eighth largest manufacturing nation, it is often quoted that a French worker can produce as much in four days as a British one can in five. Certainly, international comparisons show that per hour worked the USA and Germany produce about a sixth more than the UK.Since the onset of the pandemic, productivity in manufacturing has essentially flatlined. Even before Covid's unwelcome arrival, the Resolution Foundation think-tank calculates that, between the 2008-9 financial crisis and 2020, productivity across the whole economy grew by just 0.4 per cent annually – less than half the rate achieved across OECD nations.

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Sectoral responses to the AI revolution

But manufacturers are beginning to make up for lost time. Their trade organisation, Make UK, published a survey recently showing that more than half of manufacturers are now investing in AI, machine learning and augmented reality. Almost 40% are also planning to adopt generative AI, referring to the use of artificial intelligence to create new content such as text, images, music, audio and videos.The survey further found that of the companies that had already invested in AI, two-thirds were seeing improved productivity. Verity Davidge, Make UK's policy director, commented: “The adoption of AI, automation and other game-changing technologies by manufacturers is rapidly accelerating and will provide vital pieces in solving the productivity puzzle."But, she added: "There is still more to be done to match our competitors, especially among SMEs who face far greater hurdles in adopting digital technology. As well as tackling the digital skills barrier, which remains the biggest hurdle, government should roll out the Made Smarter scheme (a programme to build a digital innovation ecosystem among small and medium-sized manufacturers) across the UK. This has proven success in delivering step-change for SMEs on their automation journey.”One government initiative in the autumn was the launch of a £32 million scheme for the transport, construction, agriculture and creative industries to improve productivity through the use of AI. The scheme, which offered grants of between £700,000 and £1.2 million, has now closed.Meanwhile, the UK's world-leading financial services sector has not been slow in realising the future importance of AI. A European-wide survey conducted by EY found that "the UK is currently the most enthusiastic financial services market when it comes to the adoption of AI", with the industry spending about $6.7 billion in technological innovation.Patrice Latinne, EY's data and artificial intelligence partner for EMEIA financial services, commented: “Europe’s financial centres are increasingly tapped into the disruptive capabilities that AI offers today. AI is infinitely innovative, which – while exciting – comes with challenges. Governance and transparency are increasingly crucial to the safe adoption of the technology, and ethics must remain central as firms progress their tech capabilities."Sugata Gupta, global head of banking and financial services operations at multinational technology-services company HCL Tech, said: "It’s rapidly becoming clear that the financial services industry is undergoing a major transformation because of advancements in artificial intelligence and allied technologies."The World Economic Forum, in association with the Cambridge Centre for Alternative Finance, has revealed that 85% of financial services organisations have already deployed AI-based solutions. Everything from compliance automation to fraud prevention now seems destined for AI solutioning, translating to reduced costs and increased revenue."Even as AI unleashes new potential for the industry, it has also introduced new disruptions in traditional operations and "paves the way for new operating models and innovations” he added, writing on the techUK website last month. "At the current pace of adoption, experts believe that the next two years will lead to mass adoption of AI across the financial services industry."

Developing digital skills

Nevertheless, as many leaders across all industries have found, the shortage of digital skills remains the number one barrier to the effective implementation of tech innovation. A survey conducted earlier this year by Gallup and Amazon Web Services found that only 11% of UK workers possessed the necessary digital skills. It also recorded that 72% of UK businesses had vacancies for workers with digital skills and more than two-thirds (68%) found it difficult to hire the digital workers they needed.Ben Foster, CEO of internet marketing service SEO Works, said the skills shortage was the result of obsolescence due to ever-changing digital needs. “There's no doubt that the digital skills gap in the UK is pronounced,” he said. “Covid rapidly accelerated digital adoption as everyone was forced online, and many businesses woke up to the benefits of digital. Since then, demand for emerging technologies has increased ahead of the skills required to deliver them.” A £200m digital skills training scheme has been launched by the government aimed at training across high-growth UK sectors, including green energy and construction.As well as enabling UK colleges and universities to increase training opportunities for prospective job seekers allowing them to zone in on more specific digital skills gaps, the fund will increase access to higher technical qualifications (HTQs), an alternative to degrees. “This investment is about boosting local industries, building people’s skills and ultimately future-proofing our economy and the career prospects of the next generation,” said Education Secretary Gillian Keegan.Industry itself is doing its best to increase training opportunities. For example, the UK division of FANUC, one of the world's largest robotics companies, firmly believes "Gen Z could be the secret weapon the manufacturing sector needs to harness the power of automation." But the company said it was incumbent on industry to make sure this younger generation was "turned on" to careers in engineering and robotics."Despite our reputation as a strong manufacturing nation, productivity has long been the Achilles’ heel of the UK’s economy," added the company.FANUC'S training academy at its Coventry HQ now offers accredited courses that can feed into mainstream education, with students gaining hands-on experience in areas such as operating, programming, troubleshooting and integrating robots. In the summer, the company also ran its first Work Experience Week, aimed at giving young people aged between 16-18 practical insight into the world of automation.“We firmly believe that this type of close, mutually beneficial cooperation between industry and education will be the key to the success of the new T-Level system and is precisely the direct intervention we need to attract younger people to manufacturing,” said Oliver Selby, head of UK sales at FANUC.“There is a great opportunity for the robotics and advanced manufacturing sector to change the perception of manufacturing. Embracing automation, and the development of an engaged and empowered Gen Z workforce is a key part of this puzzle.”But that might not be enough, according to Russ Shaw, founder of Tech London Associates, whose main policy demand, he told the ‘New Statesman’ in November, was that: “Every adult should have to take digital skills training." And the rewards for doing so could be substantial. A report from KPMG estimates that the adoption of generative AI alone could add 1.2 per cent to the level of UK productivity, representing an additional GDP output of £31 billion per year. Yael Selfin, chief economist at KPMG UK, said: “It will take time for the new technology to be adopted across the economy. Changes to working practices, skills, and significant levels of digital investments are required to unlock the productivity benefits."If that happens, the UK's productivity puzzle might finally be solved.

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