Services sector can be key as Britain sets pace in generative AI

Anaemic and flatlining. Both recent descriptions of the UK economy paint a less-than-promising picture. While adjectives may vary, there’s a broad consensus that we need a step-change in growth. And improved confidence and increased investment are key to this happening.

Investment and confidence go hand-in-hand. Whether you’re a business contemplating a new piece of machinery or a person eyeing up a new car, a purchase is more likely if you’re confident about your future finances.

Confidence is contagious, as is negativity. Pessimistic forecasts tend to become the received wisdom and self-fulfilling prophecies.

We need to find ways to break the stalemate. PwC’s latest annual survey of 4,702 chief executives worldwide provides some clues as to how this can be achieved. Now in its 27th year, it has proved a reliable bellwether of business sentiment and intentions.

The picture it paints of the UK does not gloss over the challenges. Only 39 per cent of bosses expect the domestic economy to improve this year. But neither does it portray an economy in freeze-frame, especially when it comes to investment in technology

Strikingly, Britain’s business leaders appear to be adopting generative AI faster than their peers overseas. Forty-two per cent say they’ve implemented GenAI in their business, compared with only 9 per cent of Germany’s chief executives and 20 per cent of those in France. We’re even ahead of the United States and China. The only countries that have adopted GenAI faster are Japan, Norway and Finland.

On the face of it, the UK’s head start feels surprising. While Britain has a strong technology scene, we’re not Silicon Valley. We don’t have the AI big hitters and we don’t have the same investment power. But we shouldn’t underestimate the strength of the UK’s services sector and the role it can play in the GenAI revolution. California may have an edge on building tech models, but there’s a huge opportunity to apply them to different businesses — and to ensure that people have faith in them.

As well as technologists, it requires data scientists, researchers, ethicists, trainers and lawyers. Yes, people — not bots — which may explain why the majority of chief executives are not looking to cut jobs. In fact, almost 50 per cent are planning to increase their headcount by 5 per cent or more this year.

Whether they’ll be able to remains to be seen. Although the jobs market has softened, unemployment remains relatively low. To boost productivity, we need to make the most of existing labour by investing in skills, alongside software. At PwC, the bulk of our £100 million of UK investment in emerging technology is for training. There’s little point having the best technology if our workforce can’t put it to good use.

Indeed, adopting GenAI is just the start. The test for companies is the extent to which it will help to improve their businesses. Will it give people greater and more accurate insights? Will it free up time and boost productivity? And could the risks, such as cyberbreaches and misinformation, outweigh the benefits?

On balance, chief executives in the UK are confident of more upsides. The majority — 64 per cent — say that GenAI will increase employee efficiency in the next 12 months and a significant proportion expect revenues to increase in the same period.

Ultimately, we have to be in it to win it. Being weighted to services, our economy has advantage. It’s more agile than one based on heavy industries, so can seize the opportunity. Moreover, training people is a core part of what services firms do. Our strong education sector will also help, as will the right balance of regulation.

GenAI is only a small piece of a complex economic picture, but it’s an illustration of UK potential. It may be too early to call a new era of growth, but we need to light up the signs for all to see.

Kevin Ellis is the senior partner of PwC UK