Autumn statement 2023: Chancellor’s bet on AI investment requires focus on data fundamentals

The 2023 Autumn Statement set out by the Chancellor of the Exchequer promises further investment in Artificial Intelligence.
To benefit from the promised productivity gains, the government and the private sector must also invest in our data infrastructure.

In his 2023 Autumn Statement, the Chancellor emphasised the urgent need to boost productivity as a path to higher wages and improved living standards. To that end, the government promises to deliver ‘110 measures’ for growth, aimed at spurring business investment and promoting innovation in high-productivity sectors.

It is crucial that the government carefully prime its efforts across the economy. Tax incentives for ‘plant and machinery’ are certainly important, but so are incentives for a growing economy that relies on data and technology. It is welcome that the Autumn Statement announced R&D tax credits, subsidies for technology adoption, and funds to support start-ups.

As part of this – the government announced an ‘Incubator on Artificial Intelligence’ to operate from the heart of Whitehall, staffed by experts in AI and data engineering. According to the Chancellor, ‘the potential productivity benefits from applying AI to routine tasks across the public sector are estimated to be worth billions.’ In another move signalling growing reliance on AI, Palantir has been awarded a multi-million-pound contract to provide new data-driven software for the NHS.

The government promises a further £500 million in compute investment for AI, bringing the total for the next two years to £1.5 billion. With over thousands of AI firms already generating billions in revenue, this technology clearly offers immense potential if harnessed judiciously.  Amidst the excitement over AI, however, we must take a pragmatic view. As we pursue advanced applications, policymakers and industry leaders must also work together to strengthen digital foundations. Temporary incentives often just shift the timing of investments rather than delivering enduring productivity gains across the economy.

To fully leverage AI's potential, companies need the tools and skills to collect, manage, analyse and apply data on an ongoing basis. But surveys show that less than half of UK firms even have basic data and analytics capabilities in place. Boosting productivity requires incentives that encourage businesses to develop the enterprise data maturity and talent that AI systems rely upon.

The UK is emerging as a leader in data analytics across sectors. Government initiatives like the National Data Strategy have led to open data platforms being adopted across sectors. Key growth industries are utilising data to enable innovation. For example, retailers are leveraging purchase data and browsing analytics to provide personalised recommendations and optimise pricing. Financial institutions are using client data and predictive models to offer customised investment and insurance products tailored to individual needs and risk profiles.  

While sectors like retail and finance showcase advanced usage, the UK can still harness the power of data further. Areas needing focus include making more public sector data openly available and increased cybersecurity measures. With sound data governance and infrastructure as a foundation, techniques like artificial intelligence can be better deployed across industries for economic gains. If foundational data issues are addressed, the full promise of AI can be unlocked through retail applications like hyper-personalised marketing and financial use cases such as AI-powered fraud analytics. Policymakers should therefore consider targeted tax breaks or subsidies for long-term technology and data infrastructure investments.

Such incentives would prompt companies to dedicate resources to building the capabilities needed to utilise AI over time. Initiatives like apprenticeships and reskilling programmes focused on high-demand fields like data engineering are equally vital for developing a workforce able to work alongside AI.  

Productivity will not suddenly surge just because exciting new technologies emerge. Realising AI's touted economic boons depends first having the underlying digital infrastructure and data skills rooted across sectors. As the new AI “incubator” aims to drive efficiencies, policymakers must maintain a long-term focus on strengthening digital capabilities across the workforce too. By taking a pragmatic approach grounded in fundamentals, government and industry can work together to fully harness the promise of AI through sustained investment. The choices made today on incentives and priorities will determine whether much-touted technologies like AI boost productivity across the board or merely become buzzwords with limited impact. We must choose wisely by addressing basics before potential can be realised.