When accountants at the mid-tier firm Moore Kingston Smith first began incorporating artificial intelligence (AI) into their workflow, they witnessed a significant surge in profit margins. Teams working on fraud checks also saw massive improvements in efficiency. What used to take two weeks to complete was now being done in just two hours, thanks to AI’s capabilities.
This shift is fuelling optimism that AI might be the key to resolving Britain’s long-standing productivity issues. Over the last two decades, the UK’s growth has been sluggish, and even with the Chancellor Rachel Reeves poised to announce tax hikes in the upcoming budget, AI is seen as a potential saviour.
Economists are particularly optimistic about the UK’s heavy reliance on services. Since Britain has more service-based businesses than many other countries, particularly in sectors like accountancy and finance, the widespread adoption of AI could bring substantial rewards. In fact, ratings agency Moody’s believes the UK could benefit more than other nations from the technological advancements brought on by AI.
Becky Shields, Head of Digital Transformation at MKS, explains how AI is streamlining repetitive tasks, allowing staff more time to engage with clients. “The large language models underpinning these technologies are continuously improving, with each iteration,” she says.
Services dominate 80% of Britain’s economy, a proportion similar to the US. However, the share grows larger once government-provided services are excluded. MKS, with 1,500 employees across the UK, is utilising Google’s Gemini 2.5 AI platform to improve a variety of processes. Early results are promising, with AI-powered teams reporting an 8 percentage point higher profit margin compared to others who aren’t using AI as extensively.
The company’s use of AI also means clients can upload entire datasets for analysis, reducing paperwork and making the process more efficient. “The technology’s costs are minimal compared to older systems,” Shields notes, emphasising how AI helps to boost productivity without high additional costs.
The need for increased productivity is critical for Britain’s economy, especially with Prime Minister Keir Starmer under pressure to deliver economic growth. The country’s productivity growth has been dismal since the global financial crisis of 2007-2008. The lack of productivity improvements is also one of the key factors behind stagnant wages.
Starmer’s government is pushing to modernise infrastructure, improve planning systems, and develop skills to boost productivity. But AI could be the game-changer in driving the economy forward.
Despite the long-term potential, AI’s impact on growth isn’t expected to be instant. Bank of England Governor Andrew Bailey highlights that historical technological breakthroughs, like electricity, took decades to show a clear impact. The UK is still in the early stages of experimenting with AI, and long-term investment will be essential.
Some analysts predict that AI could increase annual growth by 0.1-0.2% in the coming years, a small but significant boost for an economy that is growing at about 1.5% per year. By the mid-2030s, it’s likely that AI will accelerate growth further, particularly in the UK, where businesses are adopting AI faster than in many other European countries.
However, there are concerns. AI might exacerbate inequality, with large firms benefiting disproportionately. Additionally, highly regulated industries like accountancy are worried about keeping up with the technology. As for the labour market, a recent survey showed that 17% of private sector employers plan to cut jobs due to AI, while only 6% expect to increase headcount.
At MKS, the firm has reduced the number of graduates hired this year as part of a strategy to speed up staff adaptation to AI, though Shields reassures that hiring will return to normal in the future.
Overall, while the full effects of AI on the UK economy remain uncertain, it is clear that it has the potential to transform Britain’s services-based economy and solve some of the productivity challenges that have been a barrier to growth for years.