London leads the way in AI implementation—but an increasing skills gap jeopardizes national progress
Companies in London are increasingly adopting artificial intelligence (AI) more rapidly and comprehensively than other regions in the UK. Nonetheless, industry experts caution that a significant lack of digital skills may hinder the overall economic advantages of this advancement and worsen regional disparities.
As per new findings by Amazon Web Services (AWS), acquired exclusively by City A.M., approximately 67 percent of businesses in London have integrated AI in some capacity—significantly above the UK average of 52 percent. In just the past year, AI adoption in the capital has surged by 40 percent, in contrast to a national growth rate of 32 percent.
Startups are instrumental in driving this movement forward. Early-stage companies in London are 1.5 times more likely than those elsewhere in the UK to be categorized as being in the most ‘transformative AI’ development phase. This term generally refers to firms that have deeply integrated AI into their operations, leading to substantial shifts in output, workflows, or client interaction.
Despite these advancements, there are rising worries about a so-called “two-tier AI economy.” During the AWS Summit in London on Tuesday, Alison Kay, AWS’s managing director for the public sector in the UK, warned that a growing digital skills gap could restrict the possible gains from the AI surge. “One in three UK businesses report they lack the digital skills necessary to adopt AI,” Kay stated.
On a national scale, the research reveals a favorable outlook for increasing adoption. AI utilization among British companies has grown by 33 percent over the last year, exceeding the European average of 27 percent, according to AWS. Businesses employing AI note an average revenue boost of 28 percent, indicating that the technology is already providing financial benefits.
However, while numerous large organizations have begun to explore AI solutions, only 14 percent are functioning at the highest level of integration. In contrast, over a third (34 percent) of startups indicate they operate at this advanced level.
“This disparity is creating a two-tier economy,” cautioned Tanuja Randery, managing director of AWS for EMEA. “Startups and digital natives are harnessing the transformative potential of AI, but if larger corporations do not catch up, the UK risks missing out on substantial productivity and innovation advancements.”
This divergence has economic ramifications. Major firms, which represent about 48 percent of the UK’s turnover, might lag in competitiveness if they do not fully leverage AI. As adoption becomes more refined, nimble startups—often free from legacy constraints—are showing greater proficiency in utilizing the technology to gain a market advantage.
A key obstacle to AI growth is the shortage of digitally skilled personnel. Across the UK, 38 percent of organizations now identify a lack of digital skills as a significant hindrance to AI implementation—up from 29 percent in 2023. On average, employers face a wait of five-and-a-half months to fill positions requiring specialized AI expertise, and 41 percent of businesses report difficulties in recruiting qualified candidates.
“This isn’t solely a technology issue—it’s a challenge related to education and the workforce,” said Tabitha Goldstaub, chair of the UK government’s AI Council. Without prompt measures to enhance digital skills across the nation, she cautions, the UK may lag in the international AI race.
Initiatives to bridge the skills gap are gaining momentum. More companies are outsourcing their AI requirements through independent software vendors (ISVs), with 57 percent of those collaborating with external providers accessing advanced AI capabilities, and 43 percent relying on partners for employee training.
In an effort to cultivate a future-ready workforce, AWS has launched a ‘Skills to Jobs Tech Alliance’ in the UK. This initiative aims to prepare 100,000 students for careers in digital fields—including AI, cybersecurity, and data analytics—by 2030. AWS states that the program will collaborate with government bodies, educators, and industry partners to build a sustainable talent pipeline.
Public sector projects are also bolstering national AI aspirations. The Department for Work and Pensions (DWP), for example, is reportedly utilizing generative AI to assist in triaging complex vulnerability cases, enhancing decision-making in frontline services. The DWP’s innovations were recently highlighted in a report by the Tony Blair Institute focused on modernizing public services. Meanwhile, Swindon Borough Council has implemented open-source AI tools to streamline the processing of housing documents, illustrating how local governments can reap the benefits of efficient AI enhancements.
Such instances may spur adoption in other areas; 78 percent of companies surveyed by AWS noted they would be more inclined to embrace AI if they observed greater usage by government.
As Britain positions itself as a prominent center for AI innovation—exemplified by initiatives like the AI Safety Summit and new funding for research labs—the challenge now lies in ensuring that the advantages are widely shared. While London currently takes the lead, experts warn
