UK business confidence remains strong as firms boost AI investment

UK businesses are optimistic about their prospects in the coming months, as they hope to see investments in new AI technology pay off. But confidence has still declined over the first half of the year – amid global uncertainty as economic growth remains sluggish around the world.

Accenture and S&P Global have polled 12,000 businesses across Europe, including 1,400 in the UK, to weigh up the expectations of firms for the immediate future. Despite inflation still being at historically high levels, an economic slowdown pervading across many large economies, and geo-political tensions still high around the world, companies are relatively optimistic.

At the end of 2022, the researchers had found business confidence in the UK to be its lowest since 2009 – a positive score of just 18%. Since the turn of the year, however, growing hype around the potential of AI technologies has boosted confidence significantly. In the first quarter of 2023, this saw net positivity of roughly 43% – higher than levels seen in 2019.

Three months on, UK firms are still more confident about the future than their European counterparts, where optimism is net positive at 19%, while the global average is a 28% positive. However, there are signs that some hopes that AI investments could offset inflation concerns are fading, though. Positivity remains high – at 40% – but has declined by three points over the second quarter of 2023.

UK companies are currently more likely to plan for investments in AI. The rate has risen to 29% from 18% in early 2022 – with firms particularly keen to add AI capabilities over the coming year, linking this to a need to streamline costs, and a desire to combat wage inflation. But amid the hype, there are mounting concerns that AI may be presenting a bubble – like NFTs and cryptocurrency before it – where investors inflate the value of companies which collapse before the potential of AI can actually be monetised.

Fears around this may be manifesting in relation to UK confidence in manufacturing. Despite the alleged potential of the AI they are investing in to boost productivity via automation, overall manufacturing output expectations dropped to 43%, down by 10% from the first quarter of 2023.

Even so, these trends have helped the UK lose confidence at a lesser rate than the rest of the world. While the UK saw a 3% decline in net confidence of its businesses, this was surpassed by the global average, and the Eurozone, both roughly at 4%.

In terms of individual economies, the US – where AI excitement has also grown rapidly – saw a minimal decline in confidence, in line with the UK. Ireland and Brazil are meanwhile the only countries with higher net confidence than the UK.

Matt Prebble, Strategy and Consulting Lead for Accenture in the UK and Ireland, said, “In an era of high inflation when many firms' margins are under pressure, the question for executives is how to transform and reinvent themselves despite these immediate challenges. It is encouraging to see that British firms are already taking action on this front by investing now to improve productivity, including new investments in advanced technologies like AI and automation."