The UK’s AI advantage does not lie in the hands of frontier tech companies – but in the leaders and workers that make up the UK economy at large. This is the source of the UK’s biggest AI potential, but also where it faces one of its greatest risks.

This report from Learning and Work Institute and The Rigby Foundation shows that AI has transformative potential for the UK economy and could present a net uplift to productivity of up to £80 billion by 2035. Yet the UK workforce does not – yet – have the skills to successfully adopt and scale AI technologies in a truly transformative way. Realising that opportunity will depend as much on people, skills and leadership as it does on the technology itself.

AI usage is growing at pace, but adoption is currently shallow and varies drastically by organisation size: our research finds that large firms (25%) are more than twice as likely to use AI extensively as small businesses (11%). Meanwhile, 26% of small organisations are not utilising AI at all, compared to 3% of large enterprises. The UK is home to sectors and individual businesses that are leading the way globally on AI adoption. But these are not the norm. Here, the AI imperative meets longstanding weaknesses in the UK’s skills system, which does not currently have the investment, adaptability and energy to fill skills gaps.

Still, we argue, the investment is manageable, the path forward is clear, and a strong political opportunity has arrived. We call on the Government to adopt a “strategic state” model to address the information gaps slowing down employer action, boost employer skills investment incentives, address weak leadership skills, and introduce much greater flexibility and adaptability into the accredited technical education system.