Driving Digital Acceleration
How cloud computing is boosting growth and productivity across the UK
Executive Summary
The next few years could be among the most pivotal for the UK’s digital and economic future. An acceleration of business innovation, powered by technologies like cloud computing, Artificial Intelligence (AI) and generative AI is beginning to kickstart faster growth and increase productivity.
However, to take full advantage of this opportunity, the UK will need more investment in digital infrastructure, digital skills, and support for businesses to help them make the most of the latest technologies.
In order to better understand the potential of cloud computing and AI in the UK, Amazon Web Services (AWS) commissioned Public First to undertake new quantitative research on how UK businesses are using – and plan to use – cloud computing. As part of this, we ran polling of over 2,000 senior business decision-makers and constructed new economic modelling on the connections between digital technology and business productivity.
Key Findings
A digital and economic transformation is underway in the UK
Together, cloud computing and AI could contribute hundreds of billions of pounds in economic value to the UK. Over three quarters (77%) of businesses who currently do not use cloud infrastructure services think they will start using cloud services in the next five years for some of their workloads, with 75% believing it will have a positive impact on their business. Nearly two thirds (63%) of businesses agree that AI could transform their business.
We are still at the beginning of this journey. Globally around 85% of total IT spend still remains on premises, rather than in cloud computing. At the same time, only around a fifth of businesses (22%) say that they are already using dedicated AI tools extensively.
Taking advantage of the digital opportunity will require investment in data centres, skills and support for businesses to help them adopt new technologies. In order to help the UK take full advantage of the economic and productivity benefits of technologies like cloud computing, AI, and generative AI, AWS has invested more than £3 billion since the start of the decade, and plans to invest a further £8 billion building and operating data centres in the UK from 2024 to 2028.
AWS estimates that these investments in the UK will contribute £14 billion to the UK’s total Gross Domestic Product (GDP) from 2024 to 2028, and support an annual average of more than 14,000 full-time jobs at local businesses over this period.
The cloud is an important enabling technology for UK growth
Independent analysis by Telecom Advisory Services estimates that the total economic impact of cloud computing in the UK accounted for over £42 billion in 2023. That’s equivalent to 1.6% of GDP, or larger than the UK’s automotive manufacturing sector.
Cloud tools are already being widely used to help businesses work more flexibly and operate more efficiently. The Office for National Statistics (ONS) has found that the use of cloud tools such as enterprise resource planning (ERP), customer relationship management (CRM) or supply chain management technologies, is associated with a productivity premium of around 25%.
The cloud democratises access to technology, and enables startups, scale ups and unicorns to have access to the same tools as the largest enterprises. Since 2013, AWS has provided more than £4.7 billion in AWS credits to startups globally via its flagship startups programme, AWS Activate. Over 80% of unicorns identified by Pitchbook in 2023 are AWS customers.
The greater scalability and flexibility of cloud infrastructure leads to significant cost savings and financial benefits for cloud users. According to polling conducted by Public First, AWS customers reported receiving an average return of over £2 for every £1 they spent on AWS.
Cloud computing helps companies innovate and bring features to market faster. On average, respondents say that using AWS reduces the time it takes to deploy new software by over a quarter (27%).
The cloud makes it easier for many businesses to adopt AI. Cloud infrastructure users are 50% more likely to be using AI tools within their business.
Being a leader in digital technology helps businesses grow and innovate faster
As part of our research, we gave each company who responded a digital intensity score based on the extent to which they were using and benefiting from cloud computing and other digital technologies.
We found that Digital Leaders (companies in the top 20% of digital intensity):
Are 4x more likely to have seen fast revenue growth above 5% in the last year
Are 3x more likely to have launched a significant new product or service in the last year
Score 3x higher on metrics of good practice in management
Invest over 4x more on average on Research & Development
Are 7x more likely to be using AI
Are 10x more likely to be using cloud infrastructure
Digital Leaders are spread across all sectors and business sizes. However, while Digital Leaders could be a business of any size, we found they are more than twice as likely to be medium or larger businesses than small.
While small and medium businesses (SMB) may be less likely to use as many digital technologies as larger enterprises, that doesn’t mean that they can’t benefit from them. In our business polling, two-thirds (66%) of SMBs who aren’t already using cloud infrastructure thought it was likely that they would benefit from using it.
If we could help just half of the remaining SMBs in the UK to catch up with the Digital Leaders and adopt technologies such as cloud computing and AI, this could generate an additional £38 billion for the UK economy over the next five years. These benefits would be spread across all regions and nations of the UK, creating, for example, an additional £2.5 billion in economic value in the West Midlands, and £3.9 billion in economic value in the North West, both over the next five years.
What is Cloud Computing?
Cloud computing is the on-demand delivery of IT resources over the internet with pay-as-you-go pricing. Instead of buying, owning, and maintaining physical data centres and servers, customers can access technology services, such as compute power, storage, and databases, on an as-needed basis from companies like AWS.
Investing in the UK’s Digital Future
A digital and economic acceleration is underway
For decades, cloud computing has played a key role in helping businesses to digitise their processes, increase productivity and create new ways of working. It makes it possible for companies of any size and in any industry across both the public and private sectors to access IT services such as computing power and data storage, as well as more advanced technologies like AI, generative AI, and machine learning (ML), flexibly, securely and easily.
Over the last five years, customer spending on cloud infrastructure has grown by over 25% a year in the UK,1 while IDC predicts that worldwide it will continue to grow by around 13% a year for the next five years.2
Many economists also believe that AI and generative AI is likely to create hundreds of billions of pounds in economic value, raising the UK’s growth rate above the 1.4% it has averaged in the last twenty years. In fact, the economic impact from AI in the next five years could be over 10 times greater than its impact in the last five.3
Estimates of the Economic Impact of AI
- The IMF (2024) estimated that AI could lead to additional productivity gains in the UK of 0.9 to 1.45 percentage points a year.
- Strand Partners (2024) estimated that digital technology could add £520 billion to the UK’s economy by 2030.
- Public First (2023) estimated that generative AI could create over £400 billion in value for the UK economy by 2030.
- Goldman Sachs (2023) estimated that AI could create productivity gains in the UK of 1.5 percentage points a year.
One reason this digital acceleration is important is because it could help to reverse the slowdown in growth we have seen across advanced economies in the Organisation for Economic Co-operation and Development (OECD) since the early 2000s – which has been particularly noticeable in the UK.
Since 2000, real GDP per person in the UK has grown only 60% as fast as in the US, and over four times slower than the UK saw in the 20 years before that.4
Since the mid 2000s, UK growth has significantly slowed
We are still at the beginning of this digital acceleration
Investing early and staying at the forefront of new technologies can give countries like the UK a key competitive advantage, and help ensure they can become home to the world leading companies of tomorrow.
That said, technological changes do not take place overnight. Most significant technologies that shift the economy take years, if not decades, to realise their full impact. It takes time for businesses to invent new workflows, train their staff, and iterate and adapt their products and services. For example, the steam engine took at least a century to fully impact the UK economy.5
Globally, around 85% of total IT spend still remains on premises.6 While a majority of businesses in the UK now make some use of online tools, such as video conferencing and group messaging, there is still a substantial opportunity for businesses to use the cloud and other tools for more complex workflows.
Similarly, while AI is expected to have a significant impact on the UK economy, at the moment only around a fifth of businesses (22%) say that they are already using dedicated AI tools extensively. Around another third of companies said they had experimented with them, while 40% had not used them at all.
For example, in other recent polling by Public First, we found that only around 16% of workers were using chatbots regularly as part of their job – although those who were using them were seeing real value, with 77% saying they found them helpful.7
Taking advantage of the digital acceleration will require significant investment in the UK
The UK is recognised as Europe’s leading digital economy.8 The UK is also a global leader in the use of cloud in the public sector, having introduced a cloud-first policy in 2013.9
However, in order to make the most of the digital opportunity, the UK will need further investment in digital infrastructure, such as data centres, to support businesses’ needs. According to our polling, 77% of businesses who do not currently use cloud believe they will likely start using cloud services in the next five years for some of their workloads.
To help meet these needs, AWS has invested more than £3 billion in the UK since the start of the decade (2020-2023), and intends to invest £8 billion in building and operating data centres in the UK over the next five years (2024-2028).11
The economic impact of data centres is driven by both the initial capital investment to construct the facility, and the operational expenditure to operate and maintain it. The construction phase, in particular, of a typical data centre campus, is a source of major job creation. Even when the major capital expenditure associated with the construction of such a campus is complete, there are still strong employment upsides. Once a campus enters its operational phase, it provides full-time equivalent jobs at local businesses in the UK including jobs supported by the direct, indirect and induced effects of AWS. By this we mean:
- Direct effects. These jobs exist within AWS suppliers, which tend to be local businesses that are directly supported by AWS investment. These jobs include roles such as electricians, engineers, maintenance, and security, and are generally in industries such as non-residential construction facilities maintenance, electricity generation, and telecommunications.
- Indirect effects. These jobs reside in the AWS supply chain that are indirectly supported by business-to-business transactions resulting from AWS investment. This includes jobs that supply the skilled labour and services needed to fulfil work for AWS, which means they are likely to be local to the UK as well.
- Induced effects. These are jobs in the broader UK economy supported by the household consumption of workers receiving compensation from AWS and the AWS supply chain. This includes jobs in industries that supply consumer goods and services to UK households.
Cloud Computing is a Driver of Growth Across the UK
Cloud computing is a key enabling technology for the UK economy
In 2023, independent analysis by Telecom Advisory Services estimated that the total economic impact of cloud computing in the UK accounted for over £42 billion.12 That’s equivalent to 1.6% of GDP, or larger than the UK’s automotive manufacturing sector.13
Telecom Advisory Services further estimated that an increase of 1% in cloud computing would yield an increase of 0.135% in Gross Value Added (GVA). That’s the equivalent of around £3 billion added to the UK economy.
Looked at in terms of labour productivity, the economic gains in 2023 due to cloud computing are equivalent to around £1,300 per worker. That’s the equivalent of two weeks’ salary for the average worker.
Cloud computing helps drive economic growth through a combination of:
- Investment in data centre infrastructure, which has significant spillover benefits for local economies through their supply chain and creation of local jobs.
- Hosting tools that help businesses work more flexibly and operate more efficiently.
- Enabling businesses that switch from on-premises IT to reduce costs, innovate faster and earn more revenue.
- Reducing the barriers to entry, helping enable a wider ecosystem of tech startups, scale ups and unicorns.
The direct revenues of cloud service providers will also contribute to economic growth.
Cloud tools help businesses work more flexibly and efficiently
Today, almost all companies are making use of online tools in some form, using a variety of free and paid cloud services. On average, companies across the country told us they now use over eight different types of online and cloud tools.
We have significant evidence that cloud tools such as online accounting, CRM, worker collaboration and ERP tools can help businesses work more flexibly, and optimise their processes. For example, the ONS found that “the use of any combination of enterprise resource planning, customer relationship management and supply chain management technologies [is] associated with a productivity premium of around 25%.”14
The majority of these online tools run on cloud infrastructure services such as AWS, allowing them to scale flexibly to meet demand. For example, tools such as Slack, Zoom and Xero all run on AWS.
CASE STUDY
MATILLION
Matillion, based in Manchester, helps thousands of enterprises to load, transform, sync, and orchestrate their data in the cloud. The AWS Partner makes data work more productive by enabling the entire data team to work more efficiently. Their software empowers customers to extract data from a wide number of data sources, load data into their chosen cloud data warehouses, and then transform that data from its siloed source state into useful, analytics-ready data that helps businesses unlock the hidden value in their business.
“Our developers use AWS to build software, running live in a cloud environment. AWS helps us secure that environment end to end for over 150 engineers.”
Rob Cornell, Vice President Cloud and Technology Alliances
The flexibility of cloud computing leads to significant cost savings for users
Cloud computing makes it easier to match computing resources to demand. Businesses and public sector organisations can ramp up their computing requirements without having to commit to investing in expensive spare servers that would otherwise go unused.
In our polling:
of AWS users think that their business had saved money as a result of investing in cloud infrastructure, with an average cost saving of 28% compared to using on-premises infrastructure.
of AWS users say that the cloud has made it easier to be flexible and to scale their computing needs up or down as required.
In total, taking into account cost savings and revenue gains, AWS customers reported receiving an average return of over £2 for every £1 they spent on AWS.
The flexibility of cloud computing leads to significant costs savings for users
Cloud computing has enabled startups, small businesses and public sector bodies to have access to the same technologies as the largest enterprises, which has helped to drive innovation faster in the UK:
On average, using the AWS Cloud reduces the time it takes to deploy new software by over a quarter
of AWS users believe that developing and deploying new software would take more time without cloud infrastructure.
of AWS users agree that cloud services have made it easier to conduct new research or develop new products.
of AWS users agree that the cloud makes it easier to bring new products to market.
CASE STUDY
UK BIOBANK
UK Biobank is a comprehensive biomedical database hosted on AWS containing de-identified genetic, lifestyle, and health data from 500,000 UK volunteer participants, with over 30 petabytes of data stored on the UK Biobank cloud system. It supports global research to advance medicine and understand the genetic, lifestyle and environmental determinants of a wide range of diseases. Over 30,000 researchers from more than 90 countries are registered to use UK Biobank and more than 10,000 peer-reviewed papers have been published as a result.
To help ensure UK Biobank has the cloud infrastructure it needs to securely store and handle its unrivalled wealth of health data, AWS will provide $10 million worth of cloud computing credits. This contribution will give UK Biobank circa £8 million in AWS credits, providing access to data storage as well as other AWS services, such as AI and machine learning.
“AWS has provided us with the underlying infrastructure to put sophisticated analysis tools and compute in the hands of researchers with just a few clicks of a mouse. They have helped to democratise access to UK Biobank’s unique research resource to researchers all around the world, such that it can be accessed by a scientist in Africa in the same way as a researcher in the UK.”
Dr Mark Effingham, Deputy CEO, UK Biobank
The cloud reduces the barriers to entry, helping to enable a wider ecosystem of tech startups, scale ups and unicorns
The UK has the largest tech sector in Europe – home to more tech unicorns than France and Germany combined. In 2023, UK startups raised over £21 billion, and the UK had the third largest amount of venture capital (VC) investment behind the US and China.15
Cloud computing makes it easier to start a new company, develop new products, services and features, and scale globally. In the past, every startup would have to build their own software stack, and invest in the sunk cost of physical servers. Today, a day-old startup can access the same leading technology as the world’s biggest companies. Since 2013, AWS has provided more than $4.7 billion in AWS credits16 globally via its flagship startups programme, AWS Activate. AWS has also helped more than 280,000 startups worldwide, and over 80% of unicorns identified by Pitchbook in 2023 are AWS customers.
In our polling, we saw continued evidence of the importance of the cloud for fast growing companies:
of AWS users agree that the use of cloud computing has made it easier to compete with larger companies.
of AWS users agree that cloud computing has have made it possible for them to take their business global.
The cloud is built to be secure-by-design
Cyber security breaches and digital attacks remain a risk for businesses of all sizes. The 2024 Cyber Security Breaches survey by the Department for Science, Innovation and Technology (DSIT) shows half of businesses and around a third of charities in the UK have experienced some form of cyber security breach or attack in the last year, with the average cost of the most serious incident being over £1,000.17
Cloud computing offers a level of security that far exceeds what individual companies or public sector organisations can afford or manage on their own. This includes physical data centre security, network security, data encryption, and regular security audits. AWS is architected to be the most secure global cloud infrastructure on which to build, migrate, and manage applications and workloads, with over 300 security services and features.18
of AWS users are confident that their company’s data is secure on the cloud.
of AWS users say they have experienced higher security as a result of cloud infrastructure.
The cloud is more sustainable than on-premises IT
The economies of scale of cloud computing don’t just apply to cost or innovation; the cloud also helps businesses and the public sector to improve their energy efficiency and sustainability too. For example, when optimising compute-heavy workloads on AWS, businesses can reduce their associated carbon footprint across several geographical regions by up to 99%.19
AWS achieves this by:
- Improved energy efficiency. AWS data centres enjoy higher server utilisation, highly optimised cooling design, and dedicated chips designed to be more energy efficient, such as Amazon’s Graviton4. Running workloads on AWS is up to 4.1 times more energy efficient than on-premises.20
- Investing in renewable energy. Amazon met its goal to match all of the electricity used across its global operations – including data centres, corporate buildings, grocery stores and fulfilment centres – with 100% renewable energy by 2030, seven years early thanks to more than 500 solar and wind projects globally.21 In addition, Amazon has been the world’s largest corporate purchaser of renewable energy for four years running, according to BloombergNEF and publicly available sources.22
Moray West offshore wind farm in Scotland
Amazon has signed a corporate power purchase agreement (CPPA) with ENGIE, increasing its share of output from Ocean Winds’ Moray West offshore wind farm in Scotland to a total of 473MW when the site becomes operational later this year. This is enough energy to power the equivalent of more than 650,000 UK homes annually.
More than half of the investment and operating costs of Moray West will benefit the UK economy, underlining Ocean Winds’ commitment to local supply chains. Moray West is also supporting a number of local education and training goals, including transitioning of skilled workforce from the oil and gas sector, apprenticeship and internship programmes, as well as sponsoring PhD candidates focused on environmental studies. The new and growing operational team in the coastal town of Buckie now includes technicians and trainee technicians with the team ready to take responsibility for the project assets as they are commissioned in 2024 and 2025.
Between 2014 to 2022, renewable energy projects in the UK enabled by Amazon have generated an estimated £285 million in investment and helped to contribute more than £90 million to the UK’s GDP. They also supported 600 local jobs in 2022 alone.
In our polling, we saw that energy efficiency and sustainability are increasingly important for businesses when choosing their IT infrastructure:
Cloud computing has enabled startups, small businesses and public sector bodies to have access to the same technologies as the largest enterprises, which has helped to drive innovation faster in the UK:
of AWS users say that energy efficiency is an important factor for their company when deciding what IT to invest in.
of AWS users describe energy efficiency as an important benefit when deciding whether to invest in cloud services.
More than three quarters (78%) of AWS users say they have seen reduced energy consumption and improved sustainability since investing in cloud infrastructure.
The cloud makes it easier for many businesses to adopt AI
In our polling, cloud infrastructure users were 50% more likely to be using AI tools already as part of their business. In addition:
of AWS users agree that the cloud makes it easier to adopt AI.
of AWS users believe that cloud computing enables them to take full advantage of AI.
At the same time, however, businesses also wanted the ability to use AI in a way that works for them. 87% of businesses with an interest in AI told us it was important to have a choice over which AI models they use.
Businesses want to retain control of which AI models they use
In our polling, we saw that businesses do not just view AI as hype, but a real opportunity for their business. 63% of businesses agree that AI could transform their business and only 29% believe that AI will have no impact.
Our polling revealed that business in all UK regions are adopting AI, and in London, half of businesses said they are already taking advantage of AI.
Business AI adoption by region
Looking at AI more broadly, only around a quarter of businesses (28%) said they had already used it to automate existing processes – but a further 41% thought they would at some point.
Businesses are interested in experimenting with a wide variety of AI use cases
CASE STUDY
NATURESCOT
NatureScot, the agency responsible for Scotland’s natural heritage worked with Informed Solutions, a global AWS Partner headquartered in Manchester, to develop an innovative AI-enabled service powered by AWS that reduced the time taken for processing applications that impact protected land by up to 65%, and automated repetitive tasks.
As a regulator and statutory consultee with experts in the natural environment, NatureScot receives and processes thousands of consultations each year from local authorities, landowners, agencies and developers that want to make changes in Scotland’s protected areas.
NatureScot combines a range of AWS AI services (including Amazon Textract and Amazon Kendra) with Informed’s proprietary AI and ML technology to transform complex case management by empowering decision makers and enabling 25% of queries and non-relevant submissions to be filtered out early, reducing caseloads.
“By allowing our experts to spend more time on complex decisions, the InformedDECISION™ platform enables us as an organisation to unlock time and free up resources to address the dual crises of biodiversity loss and climate change. Leveraging AWS services has enabled us to innovate swiftly and collaborate effectively with Informed, piloting and now considering rolling-out this platform across Scotland.”
Robbie Kernahan, Director of Green Economy, NatureScot
Supporting a growing industry of small tech companies across the UK
There is now a growing industry of independent businesses that help other organisations design, build and manage their cloud-based systems. By building on top of the cloud, a growing number of companies are able to help other organisations in their digital transformation.
While there have long been IT consultancies, the openness of the cloud has radically reshaped the market, making it much easier for small companies to enter the market or serve the needs of customers of all sizes.
The AWS Partner Network (APN) is a community that leverages AWS technologies, programmes, expertise, and tools to build solutions and services for customers. The APN has more than 130,000 partners from over 200 countries, with 70% headquartered outside of the United States.
In the UK, there are thousands of businesses registered as APN partners, distributed right across the country, who help companies in the UK to maximise the potential of cloud. While many of them remain small businesses, others have grown into significant businesses in their own right.
According to Canalys, it is estimated that for every $1 that is spent on AWS, AWS Partners can earn up to $6.20 by helping other companies to solve their key business problems.23
CASE STUDY
KAINOS
Kainos, headquartered in Belfast, specialises in providing cutting-edge digital services and platforms that help organisations transform and modernise their operations. Their expertise spans across cloud solutions, data analytics, AI, and digital transformation, helping clients to optimise processes and enhance user experiences.
Kainos’ software solutions enable businesses and government departments to harness the power of data, streamline workflows, and achieve significant operational efficiencies, driving innovation and growth in sectors including healthcare, government, and financial services.
“As an AWS Premier Tier Partner, the sheer breadth, flexibility and maturity of AWS is a key enabler for Kainos; we can very quickly deliver compelling value-adds on top of initial foundational customer engagements, pulling in whichever data, analytics and AI/ML primitives best solve the challenges at hand.”
Alistair Cowan, AWS Technology Lead, Kainos
Creating New Digital Leaders
Being a leader in digital technology helps businesses grow and innovate faster
These benefits would be spread across all regions and nations of the UK, creating, for example, an additional £2.5 billion in economic value in the West Midlands, and £3.9 billion in economic value in the North West, both over the next five years.
Across the UK, a small number of companies have continued to flourish, despite the wider growth slowdown experienced in recent decades and highlighted earlier in this report. Analysis by the ONS shows that these companies – described by the ONS as ‘frontier companies’ – have continued to grow rapidly. Over 60% of the UK’s labour productivity growth now comes from these frontier companies.24
Contribution to labour productivity growth by frontier, middle and laggard firms (ONS)
A key reason why frontier companies perform strongly, highlighted in research both by the OECD25 and the Bank of England,26 is that they are better at adopting new technologies.
As part of our research, we gave each company who responded a digital intensity score based on the extent to which they were using and benefiting from cloud computing and other digital technologies. We found a clear relationship between their overall level of digital intensity and their average revenue growth last year – the more digital technologies they were using, the faster they were growing.
In our data, there is a clear relationship between businesses' overall level of digital intensity and their average reported revenue growth
We next looked at the top 20% of companies by this score, or what we describe as Digital Leaders.
These Digital Leaders are significantly more likely to be utilising advanced digital technologies than those who had fallen behind (or Digital Followers):
Digital Leaders are 10x more likely to be using cloud infrastructure.
Digital Leaders are 7x more likely to be using AI
These Digital Leaders are also doing significantly better on a range of business metrics than the digital followers. They:
Are 4x more likely to have seen fast revenue growth above 5% in the last year.
Are 3x more likely to have launched a significant new product or service in the last year.
Score 3x times higher on metrics of good practice in management.
Invest over 4x times more on average on Research & Development.
When asked how well they were doing in comparison to other companies in their sector, Digital Leaders were significantly more confident in their ability to plan for the future, innovate, and maintain digital security.
Digital Leaders were more confident about their businesses' capabilities in many other areas, such as management, innovation and digital security
As you might expect, Digital Leaders were most likely to be found in the Information Communication Technology (ICT) sector – but we also found Digital Leaders across many other sectors too:
Digital Leaders are found across sectors
Digital Leaders are found across regions
Small and medium businesses need support with digital adoption
In order to help the UK take full advantage of the growing economic benefits of technologies including cloud computing and AI, we will need more companies to adopt these tools – not just the minority that are currently Digital Leaders.
One group that is likely to need support is small businesses with fewer than 50 employees. While Digital Leaders could be any size business, we found they were significantly more likely to be larger businesses than medium, and significantly more likely to be medium businesses than small.
Small companies are much less likely to be Digital Leaders
In our polling, however, we saw that many SMBs face the same business challenges as larger companies, and could benefit from using cloud computing, for example to host their own proprietary databases or develop their own software.
SMBs also have many of the same computing needs that could be met by cloud computing
This opportunity is also recognised by SMBs. According to our polling, two-thirds (66%) of SMBs who weren’t already using cloud infrastructure thought it was likely that they would benefit from using it.
Creating more Digital Leaders could add significant value to the UK economy
In order to explore the potential impact of creating more Digital Leaders, we produced new modelling that quantified the benefits of helping companies catch up in three ways:
- Use cloud computing to improve productivity.
- Access the greater computing efficiency and flexibility of cloud infrastructure.
- Take advantage of AI tools.
If we could help just half of SMBs who aren’t currently Digital Leaders to catch up, we estimate that this could create £38 billion in additional value for the UK economy over the next five years.
These benefits would be spread across all nations and regions of the UK, creating, for example, an additional £2.5 billion in economic value in the West Midlands, and £3.9 billion in economic value in the North West, both over the next five years
To create more Digital Leaders, we will need more workers with digital skills
Taking advantage of the digital opportunity will also require investment in digital skills and support to help businesses to adopt new technologies and take full advantage of the economic and productivity benefits.
According to research conducted by Gallup for AWS, 72% of businesses surveyed in the UK have a vacancy for workers with digital skills, but only 11% of UK workers possess advanced digital skills. Over the last four years, demand for workers with AI skills has risen twice as fast as the demand for workers on average in the UK economy.27 In recent polling by Public First, around a third of larger businesses said that AI had increased their need to hire people with digital skills.28
To help prepare the UK’s future-ready workforce and address the growing need for digitally skilled talent, in December 2020, AWS committed to investing hundreds of millions of pounds to provide free cloud computing skills training for 29 million people worldwide by 2025. More than a year ahead of schedule, AWS has surpassed this ambitious goal, having helped more than 31 million learners with all levels of technical knowledge in more than 200 countries including the UK.29
How AWS is helping with digital skills and business support
AWS has launched a number of learning and skills programmes including AWS Educate, AWS Academy, and AWS re/Start. AWS Educate offers hundreds of hours of free, self-paced online training resources and the opportunity for hands-on practice on the AWS Management Console. Designed specifically for the pre-professional learner, AWS Educate provides simple, barrier-free access to learn, practice, and evaluate your cloud skills without creating an AWS account. Learners can explore employment opportunities on the AWS Educate Job Board and earn digital badges to score an invite to the AWS Emerging Talent Community, where they can connect with other early career cloud talent. AWS Academy provides higher education institutions with free, ready-to-teach cloud computing curricula that prepare students to pursue industry-recognised AWS Certifications and in-demand jobs, while AWS re/Start is a free, cohort-based workforce development training programme that helps individuals build cloud computing skills and connects participants to employment opportunities with local employers.
AWS has also launched free training initiatives such as AWS Skill Builder, a digital learning experience that allows anyone with an internet connection and a desire to learn to access over 600 free, on-demand courses in 14 different languages, and AWS Cloud Quest: Cloud Practitioner, a game-based role-playing experience which teaches foundational cloud computing concepts while learners zap drones and collect gems in their quest to solve challenges in a virtual city.
In addition to this, AWS has committed to make AI education accessible to anyone with a desire to learn by providing free AI skills training to two million people of all ages by 2025 in order to help unlock the full potential of AI.30 To achieve this goal, AWS launched new initiatives for adults and young learners, and scaled its existing free AI training programmes – removing cost as a barrier to accessing these critical skills. This included eight, free AI and generative AI courses open to anyone and aligned to in-demand jobs.
Alongside our skills programmes, AWS also helps its customers to develop an innovative learning culture and build in-house cloud skills.
For example, AWS works with businesses that want to accelerate cloud fluency across all areas of their organisation, not just IT. The AWS Skills Guild helps accelerate the cultural and technological shifts necessary for digital transformation by helping customers launch bespoke cloud enablement initiatives, that include formal education and hands-on training. AWS also offers a free AWS Learning Needs Analysis assessment tool, and AWS Classroom Training, which provides live classes with AWS instructors who teach in-demand cloud skills and best practices using a mix of presentations, discussion, and hands-on labs.
To help accelerate adoption of cloud computing in the public sector while saving the taxpayer money, AWS signed a Memorandum of Understanding (MOU) with the UK government – the One Government Value Agreement (OGVA).31 The OGVA enables government departments, agencies, and organisations in the UK public sector to derive greater value from the AWS Cloud. It offers greater benefits in terms of training, access to an OGVA credit programme that aligns with government technology missions, and enhanced cost savings.
Amazon has also launched a new innovation accelerator to supercharge the growth of small businesses in the UK. The Amazon Innovation Accelerator32 is designed to show UK small businesses first-hand how the company innovates, by taking them inside its state-of-the-art robotics fulfilment centre in Bolton. The programme combines the expertise of Amazon, AWS, The Growth Company and Made Smarter, and offers a series of free seminars and one-to-one mentoring from Amazon UK site leads to pinpoint and address the specific challenges small businesses are facing.
Appendix - Methodology
Economic Impact from Data Centre Investments (AWS)
To measure the economic impact of data centre investments, AWS uses an input-output (I-O) model. In processing the model, AWS uses a conservative framework to define investment and calculate economic multipliers, which represents the “as built” world. AWS Economic Impact Studies can be directly correlated with what it took, or what AWS is actively planning to do, to construct, connect, operate, and maintain the data centres in a given AWS Region.
I-O models are used to measure the impact of the expansion or contraction of one economic activity on other economic activities, and on the local economy as a whole. The method uses historical data from the country, and in this report, data maintained by the OECD. The data shows the impact of each British pound spent in one industry on all other industries. AWS uses standard procedures for calculating multipliers from the I-O data supplied by the OECD.
The investment includes all expenses directly attributable to the AWS Europe (London) Region, including imports of highly specialised and proprietary equipment and software, as well as in-country spending. Local spending in London encompasses capital expenditures on construction labour, materials, and services, as well as recurring operating expenditures, such as compensation for employees and contractors, utility fees, and facilities and rental costs.
These estimates are derived from internal data and statistical data provided by the OECD. The GDP contribution by the AWS Europe (London) Region reflects the value added by AWS to the IT sector in the UK, as well as the direct, indirect, and induced effects of AWS purchases from the UK data centre supply chain.
This includes jobs supported within AWS suppliers, generally in sectors such as non-residential construction, facilities maintenance, electricity generation, and telecommunications; within the AWS supply chain indirectly supported by business-to-business transactions resulting from AWS investment; and within the broader economy supported by the household consumption of workers receiving compensation from AWS and the AWS supply chain.
Economic Contribution of Cloud to UK GDP (Telecom Advisory Services)
The aggregate economic contribution of cloud to GDP as estimated by Telecom Advisory Services is composed of: (i) the domestic revenues generated by cloud service providers due to customer spending, and (ii) the spillover effects of cloud services on the total economy. The revenues represent the spending of public and private organizations purchasing cloud services,33 while the spillover effects are the benefits generated by cloud computing in terms of IT cost efficiencies, new product development, support for incubation of startups and the like.34 By adding the economic benefits generated from the use of cloud services (the spillover effect) to the spending in cloud services (the direct effect) Telecom Advisory Services obtains their measure of the total economic contribution (see table 4-1).
Direct spending includes all revenues of cloud companies when they offer their services.35
The methodology selected for assessing the spillover of cloud computing is supported by a theoretical model that estimates spillover effects in economic output derived from cloud enterprise adoption. The model was empirically tested for a sample of European countries, due to unavailability of enough data to estimate regression analysis only based on the UK.
To estimate these effects, Telecom Advisory Services starts with an empirical model where output is explained through a Cobb–Douglas production function:
In equation (1), GVA represents gross value added, K is the physical capital stock, and L is labour. GVA is used (rather than GDP) as this is the outcome variable in the production function because the sectoral data reported for European countries in Eurostat is reported in this metric. Subscripts i, and s denote, respectively, country, and economic sector. The term A represents the Total Factor Productivity (TFP), reflecting differences in productive efficiency across industries and countries. Telecom Advisory Services expects TFP to depend on cloud enterprise adoption (denoted by CLOUD), and beyond it, Telecom Advisory Services assumes that higher artificial intelligence (AI) use will enhance cloud impact. This is reasonable, as literature suggests that both technologies are interdependent. As a result, TFP depends on country-level time-invariant characteristics represented by a fixed effect Ω, capturing idiosyncratic productivity effects. In addition, ζ reflects sector-level unobservables that make some industries more productive than others.
As it is assumed that cloud enterprise adoption contributes to increased productivity, we expect Φ > 0. Although not the focus of this study, the parameter δ will capture the specific effects of AI as interdependent to cloud.36 Inserting equation (2) into (1), Telecom Advisory Services obtains:
Applying logs to linearize, Telecom Advisory Services gets the final empirical specification for the output equation:
This model allows them to estimate the contribution to GVA and productivity of cloud computing. The baseline contribution of cloud to GVA is estimated through the parameter Φ which represents the elasticity: a 1% increase in cloud enterprise adoption will yield an increase in GVA of Φ%. By applying the cloud variation in a specific period to the elasticity estimated, we calculate the percentage increase in GVA. Multiplied by the GVA of the very same period, Telecom Advisory Services calculates the spillover effect as measured in monetary units. Once this is estimated, it can be measured how much this economic effect represents in terms of GDP by diving it by this output measure.
Business Survey (Public First)
In order to better understand how cloud technologies were being used by businesses across the UK, we ran a two-stage business poll in the UK, working with proprietary panel providers:
- In the first stage, we polled an economically representative sample of over 1,300 senior business decision makers from across the UK, with quotas set for different business sizes, regions and sectors.
- In the second stage, we ran a second booster poll to expand our sample of business cloud users to 982 users, allowing us to better understand their experience and the experience of AWS users specifically.
Economic Impact from helping half of SMBs catch up with Digital Leaders
In order to identity Digital Leaders, we scored each business based on their response to two sets of questions:
- General digital intensity of business. This includes a majority of employees using computers with access to the internet for business purposes; employment of ICT specialists; employment of programmers or data scientists; having a business website; communicating with customers through social media; accepting digital payments; using Internet of Things devices, smart sensors or wearable devices; using industrial or service robots; sales from e-commerce make up at least 10% of total turnover; the business makes use of big data analysis; the business uses digital services or tools to enable workers to work remotely.
- Use of online apps or cloud services for business functions. This includes email; sales; office suites; web hosting; instant messaging; tracking inventory; customer support or CRM; time tracking; managing expenses; invoicing, data dashboards or analytics; accounting; project management; or ERP.
Those who scored in the top 20% of our combined metric we designated as Digital Leaders.
We then estimated the aggregate impact of how catching up with Digital Leaders could help other SMBs:
- Supporting good management. We looked at the potential from taking advantage of the business productivity enabled by modern cloud tools for managing customers, supply chains and production. To do this, we looked at the relative difference in take up of CRM and ERP between the two groups, and combined this with an estimate of the productivity impact of these tools based on recent ONS and OECD data.
- Taking advantage of the efficiency and flexibility of cloud infrastructure. As well as using SaaS cloud tools, Digital Leaders were also much more likely to be directly using cloud infrastructure services. To estimate the impact of matching uptake here, we combined OECD data with the reported relative reduction in costs and increase in profitability from our survey data.
Preparing companies to take advantage of current and future gains from AI services. In our polling, we found a strong correlation between companies that were Digital Leaders, and those who said they were already extensively using AI services. In order to model, we draw on Public First’s existing internal model of the medium term potential of AI, assuming that matching Digital Leaders’ level of current adoption speeds up overall SMB adoption proportionately.