London’s AI surge at risk from skills crunch, Amazon warns
London businesses are embracing artificial intelligence (AI) faster and more comprehensively than the rest of the UK, but the capital’s acute digital skills shortage risks limiting the broader economic gains from this progress.
New research from Amazon Web Services (AWS) revealed exclusively to City AM that 67 per cent of London-based businesses have now adopted AI in some capacity, significantly above the UK average of 52 per cent.
The rate of adoption in the capital has grown 40 per cent year on year – also outpacing the national average of 32 per cent.
Startups, in particular, are driving this trend. London’s early stage firms are 1.5 times more likely than their regional counterparts to be operating at the most ‘transforming AI’ stage.
Yet, despite this growth, the report identifies an emerging bifurcation in AI maturity.
Speaking at the AWS Summit on Tuesday, Alison Kay, managing director for public sector at AWS, warned that skills remain a critical barrier to AI adoption. “One in three UK businesses say they lack the digital skills needed to adopt AI,” she said.
Emerging gaps
The broader UK landscape presents a positive picture of accelerating AI adoption.
Nationally, AI uptake among businesses has increased by 33% in the past year, outstripping the European average of 27%.
On average, reported revenue increases linked to AI adoption stand at 28 per cent.
But while large enterprises have demonstrated a willingness to experiment with AI, 55 per cent report using the technology consistently, only 14 per cent are currently operating at the most advanced level of adoption.
However, over a third (34 per cent) of startups have reached this stage, indicating that smaller, more agile companies are more likely to embed AI deeply into their operational models.
“This gap is creating a two-tier economy”, said Tanuja Randery, managing director at AWS EMEA. “Startups and digital natives are seizing the transformative potential o AI, but unless large enterprises catch up, the UK risks missing out on significant productivity and innovation gains.”
The implications could be detremental to businesses. Large enterprises, responsible for nearly half, or 48 per cent, of UK turnover, risk underutilising AI’s full potential unless they accelerate beyond the exploratory phases of adoption.
Skills and infrastructure bottlenecks
Across the UK, access to digitally skilled talent remains the most frequently cited barrier to AI adoption.
A growing number of businesses – 38 per cent, up from 29 per cent last year – now identify digital skills shortages as a major constraint.
Hiring times for roles requiring AI expertise average five and a half months, and 41 per cent of firms report difficulty recruiting staff with suitable digital capabilities.
“To maintain momentum, we urgently need to address the AI skills gap”, said Tabitha Goldstaub, chair of the UK government’s AI council.
To help mitigate these challenges, more businesses are turning to independent software vendors (ISVs) and third-party providers.
Among companies sourcing AI externally, 57 per cent are tapping into advanced functionalities, and 43 per cent are engaging outside partners for training.
In response, AWS announced the launch of the ‘skills to jobs tech alliance’ in the UK, pledging to equip 100,000 students with pathways into AI, cybersecurity, and data roles by 2030.
“We’re partnering with government, industry, and education to ensure the next generation has every opportunity to thrive in the digital economy,” Kay claimed.
The role of the public sector
The public sector is emerging as a key lever for accelerating national AI readiness.
The Department for Work and Pensions is using generative AI to triage vulnerability cases, while Swindon Borough Council has deployed open-source tools to streamline housing documentation processes.
According to AWS, 78 per cent of surveyed businesses indicated that increased government use of AI would incentivise them to do the same.