UK Government Spends Over £3.35bn on AI Projects

The UK government has poured more than £3.35 billion into artificial intelligence (AI) projects, infrastructure, and services since the technology began to gain traction around 2018, according to data analysed by consultancy Tussell for Sky News.

Despite politicians’ promises that AI will boost the economy, improve public services, and create jobs, the figures reveal a mixed picture of government engagement with the technology.

The largest single AI contract is a £1 billion deal between the Met Office and Microsoft, signed in 2021, to build the world’s most powerful weather and climate forecasting supercomputer. Microsoft has also signed smaller contracts to provide its Copilot AI services to various departments.

Another major deal involves Transport for London (TfL) and Init, a German public transport technology firm, valued at £259 million.

In contrast, Alphabet, the parent company of Google and one of the biggest global players in AI, has secured just two small UK government contracts—with the Cabinet Office and Ministry of Justice—worth a combined £2.5 million.

Meanwhile, US firm Palantir holds 25 separate contracts worth £376 million. Its UK chief, Louis Mosley, told Sky News that the company supports the NHS by helping junior doctors draft discharge summaries and assists defence intelligence teams in analysing data more efficiently. He defended concerns about data privacy, saying Palantir’s systems are designed to make AI “secure, transparent, and auditable.”

However, Mosley believes ministers need to be more ambitious: “They’re saying the right things, but there’s still a fear of change. Ministers need to be brave and embrace transformation,” he said.

When it comes to departmental spending, the Department for Science, Innovation and Technology and the Department for Transport lead the way. Surprisingly, data-heavy departments such as HM Treasury and the Department for Work and Pensions (DWP) rank near the bottom.

Despite the DWP’s annual IT budget exceeding £1 billion, it has spent less than £100 million on AI since 2018. Experts point to a combination of short-term policymaking, limited digital expertise, and outdated IT infrastructure—with some systems reportedly running on decades-old technology.

Analysts warn that the government has yet to tap into the full potential of AI in departments where automation and data-driven decisions could generate significant savings. The UK’s public sector AI journey, they say, is only just beginning.