According to new research by PwC, the enormous impact of Artificial Intelligence (AI) could create a considerable number of Scottish jobs over the next 20 years. The company’s latest UK Economic Outlook (UKEO), predicts that the deployment of robotics, drones, driverless vehicles and other digital innovations aimed at ‘smart automation,’ could lead to the creation of 558,000 jobs, as the employment market faces its biggest shake-up in a lifetime.

The report says that AI will create more jobs as productivity and real incomes rise, and new better products are developed. PwC asserts that AI will reduce prices while labour saving technologies brought about by AI will improve the quality of existing products and enable new products to be brought to market, which also create a need for additional workers.

The net effect on this will be most positively felt in London, with 138,000 addition jobs created, or +2.3% of existing job numbers. This is followed by the South East, with 41,000 jobs or +0.8% of existing job numbers. Scotland is third in the list of 12 nations and regions, with 15,000 jobs or +0.5% of existing job numbers. The analysis leads to the expectation that 46% of long-term UK output growth will come from AI, or around 0.9% of UK GDP growth per year, on average.

Douglas Shand, PwC’s head of technology and innovation in Scotland, commented: “We are well positioned in Scotland to be creators of  AI technology and not just consumers. Our excellent computer science programmes at our universities can deliver graduates with the right skills to be market leaders and innovators as the technology develops.”

Estimate Assumes UK will Avoid ‘Hard Brexit’

The study projects growth in Scotland of just over 1% in 2018, this figure lags behind the estimated UK growth of 1.3%, however, Scotland’s growth is expected to rise to 1.3% in 2019 but remain behind overall UK growth of 1.6% in 2019. PwC predicts this modest growth will come as a result of the continuation of subdued real consumer spending growth and the drag on business investment from ongoing economic and political uncertainty relating to the Brexit negotiations.

This conservative outlook is based on the assumption the UK will avoid a ‘hard Brexit’, which would see the UK leave the EU in March 2019 without any trade or transitional agreement and therefore revert to World Trade Organisation rules. Furthermore, the UKEO also forecasts that the Bank of England’s Monetary Policy Committee will increase interest rates by a quarter of one percent this year, with one further increase in 2019.

David Brown, government and public sector leader for PwC in Scotland, said: “The overall economic growth rates in Scotland remains below the UK’s as the construction and services industries continue to post relatively weak performances, coupled with overall reductions in investment across businesses.”

Government Must Support Positive Benefits of AI

Euan Cameron, UK AI leader at PwC, said: “AI offers a huge potential economic boost to the UK and it’s great to see the government recognise and support the development of the sector through the AI Sector Deal.

“As our analysis shows, there will be winners and losers. It’s likely that the fourth industrial revolution will favour those with strong digital skills, as well as capabilities like creativity and teamwork which machines find it harder to replicate.

“Historically, rapid technology change has often been associated with increases in wealth and income inequality, so it’s vital that government and business works together to make sure everyone benefits from the positive benefits that AI can bring.”

To mitigate the displacement effect PwC’s recommendations are that:

• Government should invest more in ‘STEAM’ skills that will be most useful to people in this increasingly automated world. This means focusing more on STEM subjects (science, technology, engineering and mathematics), but also exploring how art and design (the ‘A’ in ‘STEAM’) can feature at the heart of innovation.
• Governments should also encourage workers to continually update and adapt their skills so as to complement what machines can do.
• Government should strengthen the safety net for those who find it hard to adjust to technological changes.

To make the most of the income effect PwC recommends:

• Place-based industrial strategy should target job creation. Central and local government bodies need to support sectors that can generate new jobs, for example through place-based strategies focused on university research centres, science parks and other enablers of business growth.
• Government should implement its AI strategy in full, which sets out a broad range of policies to support development of the AI sector, linked into the broader industrial strategy. This would go a long way to maximising the income effect of AI on jobs in the UK.
• Promoting effective competition: it is critical to maximising the income effect that the productivity gains from AI are passed through in large part to consumers through lower (quality-adjusted) prices. This requires competitive pressure to be maintained both in the technology sector producing the AI and in the sectors using it, so an effective competition policy will be important, balancing the need for a reasonable return to innovation with providing long term benefits to consumers.