£16.7bn Artificial Intelligence boost for Scottish GDP by 2030 – PwC

That’s the equivalent of an annual £2,200 extra spending power per Scottish household, with the improvements coming from gains in productivity, new business investment and product improvement, the report says.

PwC’s research estimates that there will be significant gains across all UK regions. Overall UK GDP could be 10.3 per cent higher in 2030 as a result of AI - the equivalent of an additional £232 billion, making AI the biggest commercial opportunity in today’s fast-changing economy.

Scotland’s GDP could increase by around 8.4 per cent: in monetary terms; that’s well ahead of the other devolved nations where Wales could expect 9.8 per cent GDP growth (£7.9bn), and Northern Ireland 5.4 per cent (£2.6bn). That compares with England where there is the potential to grow GDP by 10.6 per cent (worth £204.5bn) by 2030.

AI refers to computer systems that can sense their environment, think, learn and then take action as a result. This ability to respond to the environment sets artificial intelligence apart from automation of routine tasks. Machine learning algorithms and chatbots are examples of AI that are already used by businesses today.

In its assessment of the economic potential of AI, PwC looked at four different elements:

The larger total impact on GDP in some UK regions reflects the different trade patterns in each of the countries. England, and to some extent Scotland and Wales, have stronger trade links with Europe and the rest of the world, which equates to higher gains that could flow from the introduction of AI.

The gains through trade related to artificial intelligence are likely to put even higher upwards pressure on GDP in these countries by 2030.

However, AI will have a similarly large impact on domestic components of GDP - consumption and investment - in each of the regions, with extra annual consumption per household could be up to £1800-£2300 higher in 2030. Although Scotland may not experience the total GDP impacts on the same scale as England because of fewer European and global trade links, there could be an annual spending power increase of around £2,200 annually, only marginally less than the equivalent projected for England.

Jonathan Gillham, economist at PwC, said: “Much of the focus on AI to date has been on the impact that increased automation of tasks will have on jobs. While we expect that the nature of jobs will change and that some will be susceptible to automation, our research shows that the huge boost to UK GDP that AI-driven products and services will bring will go a significant way to rebalance the impact.

“AI will make everyday products better, more personalised and cheaper over the longer term, which we predict will fuel increased demand. Automating the more mundane and repetitive aspects of people’s jobs will also increase the UK’s productivity, boost wages and give people more free time.”

The research shows that the majority of the UK’s economic gains between 2016 - 2030 will come from increasing consumer demand, resulting from A and this will drive a greater choice of products, increased personalisation of those products and make them more affordable over time.

PwC’s research predicts that the benefits from labour productivity growth will be felt first, with the increased consumption-led benefits from AI-enhanced products coming through later as more of them come onto the market. As this happens, competition within the AI goods market will increase dramatically, leading to future increases in the value of goods to consumers and therefore the amount people spend on them.

Euan Cameron, UK Artificial Intelligence leader at PwC, said: “The potential size of the AI prize is huge and our research shows it has the potential to transform the productivity and GDP potential of the UK’s economy. But in order for the UK to realise the potential gains from AI we need to ensure that AI systems are adopted in a responsible way and that every part of society can reap the benefits.

“No sector or business is immune from the impact of AI. That’s why it’s so important for the UK to place itself at the forefront of the AI revolution and create the right environment for existing and new businesses to innovate and make the most of the product, productivity and wage benefits that this technology can bring.”

The analysis underlines how the scale of the AI opportunity needs to be underpinned by both more robust governance and new operating models to realise its full potential. PwC’s Responsible AI report warns that effective controls need to be built into the design and implementation phase to ensure AI’s positive potential is secured, and address stakeholder concerns about it operating beyond the boundaries of reasonable control.

PwC’s global report outlines the economies that are set to gain the most from AI. Drawing on the most detailed analysis of the business impact of AI ever carried out, the report predicts that the greatest economic gains from AI will be in China (26 per cent boost to GDP in 2030) and North America (14.5 per cent boost), equivalent to a total of $10.7 trillion and accounting for almost 70 per cent of the global economic impact. Included in the analysis, the PwC AI Impact Index pinpoints three business areas with the greatest AI potential in each of eight sectors, such as image-based diagnostics, on-demand production and autonomous traffic control.

Overall, the biggest sector gains globally will be in retail, financial services, and healthcare as AI increases productivity, product value and consumption. By 2030, an additional $9trn of GDP will be added from product enhancements and shifts in consumer demand, behaviour, as AI-driven consumption gains overtake those of productivity.

Jon Andrews, head of technology and investments at PwC, said: “Our analysis highlights that the value of AI enhancing and adding to what businesses can do now is large, if not larger than the impact of automation. It demonstrates how big a game changer AI is likely to be – transforming businesses, people’s lives and society as a whole.

“The big question is how to secure the right talent, technology and access to data to make the most of this opportunity. To meet this challenge we need to be even more innovative in the way we develop technology skills in the UK. At PwC we’ve created a new technology degree apprenticeship to grow the future of the UK’s technology industry at a much earlier stage and to make sure we have the right skills to prosper in the future.”