The UK Government today published its latest Artificial Intelligence Sector Study, collecting data from across the last year to give an overview of recent AI activity in the UK, as well as the firms behind the algorithms.

According to the government, the data shows that as of 2023 there are more than 3,700 AI companies in the UK, generating more than £10 billion in revenues, employing more than 60,000 people in AI related roles, and contributing £5.8 billion in Gross Value Added (GVA).

That makes a 17% increase in AI companies operating in the UK since 2022, with AI-related revenues increasing by over a third in one year (34%), and a huge 57% spike in AI-related GVA.

The report shows that within the last year many new micro enterprises have entered the UK AI sector, however while the share of large AI companies has remained constant, the number of small and medium sized companies has declined, pointing to potential scaling challenges.

Despite that decline, SMEs or micro businesses still make up 96% of the AI companies identified in the last year, with large companies accounting for just the remaining 4% of registered AI firms.

Those numbers don’t reflect the gulf in funding, technical expertise, and market share of AI companies, with larger enterprises dominating the sector. In fact, the top 10 AI companies in the UK account for 62% of the sector’s total GVA, indicating a high degree of concentration among a small number of large players. 

London still dominates the AI scene

The geographical concentration of AI companies in the UK also remains heavily skewed, with London, the South East, and the East of England, accounting for 75% of registered office locations and 72% of trading locations, and London alone securing more than 70% (£822 million) of total equity investment for AI firms in 2023.

The statistics do show that there is growing AI activity outside these areas, however, with Scotland (5%), the South West (4%), and North West (4%) having a greater share of AI firms than in 2022. 

While London, the South East, and East of England dominate in financial services, R&D, marketing, and entertainment AI, other regions show more activity in automotive, transportation, manufacturing, energy, utilities, and agricultural technology AI applications.

Interestingly, the US still plays an outsized role in the sector, accounting for over half of the UK’s internationally headquartered AI companies and more than three-quarters of AI-related employment, revenue, and GVA generated by international companies.

Overall, international firms only account for 9% of AI companies in the UK, but make up 47% of AI-related revenues and 33% of AI employment.

AI employment growing (in places)

Although employment in the AI sector has jumped by almost a third (29%) in the last year, the findings point to an uneven split in the industry, with large and micro companies growing their share of employment, while SMEs seem to be getting squeezed.

Almost half (47%) of these employees are within dedicated AI companies, with the remainder working in AI roles for diversified companies. The top roles within AI are strategy and consulting (17,600 employees), model development (10,700), and computer vision and image processing (10,000).

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AI investments back on track

While 2023 investments in AI companies dropped by 50% to £1.2 billion, between January and July 2024, AI companies secured £1.5 billion through 150 fundraising deals, already surpassing the total raised in 2023. 

That might not match the peaks of 2022, but the government claims that investment in UK AI projects is showing stable growth, with Investor interviews revealing a renewed sense of optimism in the investment market. 

“AI has the potential to transform our economy and benefit our daily lives. Harnessing its potential could help us tackle some of the biggest challenges we face, from climate change to healthcare,” said Feryal Clark, under-secretary of state for AI and digital government.

“Adopting and developing AI makes our businesses more competitive on the global stage, and able to provide the highest quality goods and services to citizens. That is why the UK is taking a leading role in advancing the development and adoption of artificial intelligence globally.”