AI boom is starting to show in UK economy's performance

By Andy Bruce

MANCHESTER, England, Aug 13 (Reuters) - Britain's economy is showing the clearest signs yet that it is benefitting from the global artificial intelligence boom, with data on Thursday showing rapid growth in related industries and a surge in computer hardware investment.

While the Office for National Statistics said Britain's economy grew by 0.4% in the second quarter, the information and communications sector contributed almost half of that expansion — more than any other industry.

Within the sector, the ONS said the output of computer programming, consultancy and related activities — which would include AI companies — surged by 3.7% on the quarter, on top of a 3.8% rise in the previous quarter.

Since becoming prime minister in July, Andy Burnham has made AI a Cabinet-level priority.

His team has signalled a shift away from the previous government's U.S.-centric approach towards greater emphasis on British ownership, "tech sovereignty" and protecting workers from disruption.

U.S. data has also pointed to AI's growing impact on the world's largest economy.

ONS investment data on Thursday offered more evidence of an AI impact.

Spending on plant and machinery across the economy has grown strongly this year, rising to £22.1 billion ($29.8 billion) in the second quarter — within a whisker of a one-off record high hit in early 2022 caused by the timing of tax breaks.

An ONS spokesperson said the most recent strong reading reflected ICT equipment, particularly computer hardware as well as government spending on weapons systems.

The ONS's quarterly survey of business capital assets also showed a strong increase in computer hardware investment.

"A big step up in investment into information and communications technology suggests that the build out of computing power needed to run artificial intelligence boosted business investment," said Andrew Wishart, senior UK economist at Berenberg.

British manufacturers are also benefitting.

Output across British computing, electronic and optical product manufacturers grew by 10.7% in annual terms in the second quarter — ranking top among the 13 manufacturing sub-sectors for the first time since early 2017.

($1 = 0.7415 pounds)

(Reporting by Andy Bruce; Editing by Toby Chopra)