As the UK government ramps its focus on artificial intelligence (AI), new opportunities for suppliers to collaborate on transformative public sector projects are emerging. This blog explores the latest trends, key government initiatives, and top buyers to watch.

AI in focus

On 13 January 2025, the Department for Science, Innovation and Technology (DSIT) published its AI Opportunities Action Plan, led by Matt Clifford. 

The AI Opportunities Action Plan, first announced in July 2024, offers a strategic roadmap for using AI to promote economic growth, productivity, and citizen benefits.

While AI promises significant efficiency and innovation gains, challenges like cybersecurity risks, ethical concerns, and cost management—especially for taxpayer-funded projects—cannot be overlooked.

Without clear steps and safeguards, AI can pose significant risks, including cybersecurity vulnerabilities, ethical concerns, and cost pressures, particularly when managing taxpayer-funded projects.

As the government prioritises AI, procurement activity in the sector is forecasted to grow. Many technology suppliers partner with government departments on AI strategies, while others are keen to compete for contracts. This plan paves the way for more structured and strategic initiatives surrounding AI.

A review of the AI action plan for UK public sector suppliers

Following a review of the AI Opportunities Action Plan, this section summarises the most important areas for suppliers focused on selling into the public sector.

The large-scale adoption of reliable, high-performing AI is essential for achieving the UK government’s five key missions, particularly driving broad-based economic growth. 

According to the plan, the government must strengthen foundational areas such as data infrastructure, skills development, talent cultivation, intellectual property (IP), and assurance measures to support this transformation. 

Sector-specific AI adoption

As Matt Clifford’s plan notes, AI adoption in the UK public sector is still in its early stages. However, its applications must address the distinct needs of each industry. For example, healthcare demands differ significantly from manufacturing. 

Despite this, AI is already delivering measurable benefits across various industries. Examples from the action plan include:

• Streamlining repetitive tasks: AI assistants automate routine activities, saving employees up to 20% of their time. In education, pilot studies show that teachers can reduce the over 15 hours per week they spend on lesson planning and marking with AI tools.
• Improving document production: AI reduces drafting times by 20–80%, as seen in professional services. Similar efficiencies are being tested in the NHS to save clinical practitioners’ time.
• Enhancing security: Police forces across the UK use AI for automated anomaly detection and social media moderation to address online threats effectively.
• Advancing healthcare diagnostics: The £21 million AI Diagnostics Fund enables faster lung cancer diagnosis and treatment through AI-powered chest X-rays and CT scans, benefiting over half of England’s acute trusts.
• Transforming education assessments: A Department for Education pilot demonstrated that generative AI marking tools achieved 92% accuracy in evaluating Year 4 literacy work.

Labour sees AI adoption as a key to improving public services, boosting productivity, and achieving cost efficiency, so we expect upward procurement trends throughout 2025.

Recent trends in AI adoption in the public sector

Significant advancements in digital transformation across the UK central government, driven by innovative technology adoption, occurred in late 2024. The Crown Commercial Service (CCS) signed a landmark Memorandum of Understanding with Microsoft UK under the Strategic Portfolio Agreement (SPA24), streamlining access to Microsoft’s AI and cloud solutions for public sector organisations. 

Similarly, the Home Office completed one of the UK government’s most significant cloud transformation projects in partnership with Capgemini. The initiative leverages AI to improve data security, scalability, and operational performance by migrating critical services to the cloud, reinforcing the government’s commitment to modernising public service delivery.

AI offers significant benefits to the public sector, including streamlined processes for greater efficiency, data-driven decision-making, and cost optimisation through task automation. However, skills shortages, cybersecurity risks, and inadequate infrastructure remain barriers to success.

Most active buyers by volume

Reviewing filters set up in Stotles’ pipeline generation platform, the Defence Science & Technology Laboratory led the way in contract award volume between September 2021 and September 2024, with 19 contracts secured worth over £100k. 

Following them are the Ministry of Defence with 9 contracts, the Department for Work and Pensions with 6 contracts, the Department of Health and Social Care with 5 contracts, and DEFRA with 4 contracts. 

Most active buyers by value

The Defence Science & Technology Laboratory again emerged as the frontrunner, spending over £92 million when ranked by contract value. NHS Shared Business Services follows closely, committing over £90 million to AI-related initiatives worth over £100k. 

HMRC, Ministry of Defence, and North Lanarkshire Council round out the top 5, with total contract awards exceeding £48.9 million, £18 million, and £17.6 million, respectively. 

For more information on how your company stacks up again your competitors winning business with public sector buyers, sign up for a free Stotles account.

Next steps for AI companies

These trends showcase robust opportunities for AI providers, particularly in defence, healthcare, and government operational efficiency. Suppliers should target these sectors with tailored solutions to address their unique challenges and capitalise on growing investments.

Our next blog will spotlight Modular Data, an SME supplier working with the public sector on data governance and AI transformation projects. You can read their response to the AI Action Plan here.