UK Government AI Contracts Soar to £573M as Public Sector Investment Accelerates

The UK Government’s AI Contracts Hit £573M in 2025

Up to July 15, 2025, the UK government has invested £573 million ($770 million) in AI-related projects. This figure already exceeds the total AI spending for the entire year of 2024, which stood at £468 million ($628 million). Such a shift highlights a clear increase in commitment to integrating AI technology within public services.

Breakdown of AI Contract Spending

According to data from Tussell, a government procurement data provider, the £573 million covers a broad range of AI initiatives. These include generative AI, predictive analytics, image recognition, and automation projects. The government aims to use AI as a tool to reduce bureaucracy and improve efficiency across departments.

In March, ministers projected that adopting new technology could save the civil service at least £45 billion ($60 billion) annually. A Cabinet Office spokesperson noted, “Sluggish, outdated systems have held back public services for too long — costing time, money and public trust. From improving services and cutting waste, AI is helping us build a smarter state.”

Major Contracts and Leading Corporate Recipients

The largest contract awarded this year is a £234 million ($314 million) deal with LGC Group, formerly known as the Laboratory of the Government Chemist. This contract focuses on developing a national measurement system.

Since 2020, Microsoft has been the biggest corporate recipient of government AI contracts, securing £1 billion ($1.34 billion). Other significant recipients include:

• Palantir – £374 million ($502 million)
• Init Innovations in Transportation – £259 million ($347 million)
• Hewlett Packard Enterprise – £176 million ($236 million)
• Kainos (Belfast-based software group) – £65 million ($87 million)
• Capgemini – £50 million ($67 million)
• UiPath (automation company) – £19 million ($25.5 million)

UiPath’s CEO, Daniel Dines, highlighted the Department for Work and Pensions (DWP) as one of its largest public sector clients. Their recent £10 million ($13 million) contract through 2026 focuses on automating processes within the department. UiPath also supports the Student Loans Company, NHS, Land Registry, and Scottish Police Authority. Dines praised the UK public sector’s agility compared to Europe and applauded the government’s drive for efficiency.

Strategic Partnerships and Concerns

In July, the government established a strategic partnership with OpenAI. This collaboration involves OpenAI investing in the UK while providing AI technology to support public services.

However, some critics raise concerns about privacy and ethics. Palantir’s growing role in digitizing NHS systems has been flagged as a potential privacy risk due to access to sensitive patient data. Amnesty International UK also criticized the DWP’s focus on AI in managing universal credit and disability payments, warning that some claimants face delays and confusion.

The DWP responded by emphasizing that legal and ethical safeguards are in place. They stated, “We want to improve the experience for everyone who needs to access and use our services, and technology plays an important part in that.”

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