UK government has awarded £573m in AI contracts this year

The largest single contract awarded this year, valued at over £234 million, went to the LGC Group

The UK government has accelerated its investment in AI technologies, awarding AI-related contracts worth £573 million so far this year – surpassing the total of £468 million allocated throughout 2024.

This data, provided by government procurement analyst Tussell, indicates a major push by Whitehall to harness AI for streamlining public services, cutting waste, and driving economic growth.

The contracts awarded up to 15th July cover a wide range of AI applications, including genAI, predictive data analytics, automation and image recognition.

While some deals extend over several years and do not necessarily indicate immediate spending, the increased financial commitment signals ministers' ambitions to transform the civil service through cutting-edge technology.

Prime minister Keir Starmer has been a vocal advocate for AI as a means to enhance government efficiency.

In March, ministers projected that AI-driven reforms could save Whitehall at least £45 billion annually. Building on this vision, the government recently formalised a strategic partnership with OpenAI.

Under this agreement, OpenAI will invest in the UK while Whitehall integrates its technology across public services, although financial details remain undisclosed.

The government's AI contracts have delivered substantial revenue to major tech firms over the last five years. The biggest winners over this period were Microsoft, Palantir, HPE, LGC Group and Kainos.

Daniel Dines, CEO of RPA vendor UiPath which has received £10 million in AI contracts from the Department for Work and Pensions (DWP), told the FT that the UK government's strong emphasis on improving efficiency puts it ahead of the rest of Europe.

However, the government's AI engagements have not escaped controversy.

In July, Amnesty UK criticised the DWP's "unhealthy obsession" with AI in reforming universal credit and disability benefits, warning the technology was trapping some claimants in "bureaucratic limbo."

The DWP responded by affirming its commitment to improving service accessibility while ensuring lawful, ethical and proportionate data use.

The use of US spy technology company Palantir’s technology to underpin NHS England’s health data platform has also been highly controversial.

Despite these challenges, the majority of government AI spending is focused on less contentious projects.

The largest single contract awarded this year, valued at over £234 million, went to the LGC Group (formerly the Laboratory of the Government Chemist) to research and develop a national measurement system.

This surge in government AI investment comes amid a broader national strategy unveiled in January aimed at unlocking AI's potential to revolutionise public services.

The UK's AI Opportunities Action Plan, championed by British tech investor Matt Clifford, outlines 50 recommendations to foster AI innovation across sectors including healthcare, education and infrastructure.

International experts back the government's optimism. The International Monetary Fund estimates that widescale AI adoption could boost UK productivity by as much as 1.5% per year. Over ten years, this could translate to an economic benefit of roughly £47 billion.

"Artificial intelligence will drive incredible change in our country. From teachers personalising lessons, to supporting small businesses with their record-keeping, to speeding up planning applications, it has the potential to transform the lives of working people," Starmer said in January. "Our plan will make Britain the world leader."