The UK public sector has awarded £5bn (US$6.7bn) in artificial intelligence contracts since 2018, with 2026 already breaking the record for annual AI spending at £1.4bn (US$1.9bn) - and that figure is expected to rise with a quarter of the year still to go, according to new data from insights firm Tussell.
The figures come from the UK Public Sector AI Procurement Tracker, which shows 453 AI-related contracts were awarded between January and August 2026. That surpasses the total value of any previous year and puts 2026 on course to overtake 2025 as the biggest year by number of contracts awarded. In 2025, the public sector spent £1.18bn across 521 contracts. For context, in 2018, public sector organisations spent £69m (US$94m) on 31 AI contracts.
Who is buying AI
The Met Office is the largest public sector buyer of AI, having spent £1.03bn (US$1.4bn) since 2018. The Ministry of Defence follows at £604m (US$823m), then the Department for Science, Innovation & Technology at £501m (US$682m), the Cabinet Office at £489m (US$666m), and NHS England at £384m (US$523m).
Only one other central government department, the Department for Health and Social Care, appears in the top 10, having spent £89m (US$121m). Notably, Blackpool Council, Transport for London, the University of Bristol, and the University of York have each outspent all but five central government departments and bodies on AI over the same period.
Suppliers and sovereign AI
Microsoft is the largest supplier of AI to the public sector, with contracts worth £1.03bn (US$1.4bn). Palantir, KPMG, Hochtief, and the Laboratory of the Government Chemist round out the top five suppliers, with contract values ranging from £284m (US$387m) to £1.03bn.
One of the notable contracts awarded recently is a £456m (US$616m) deal between the Cabinet Office, KPMG, and EY to establish a National School of Government and Public Service, covering civil service training including digital and AI.
Digital and AI sovereignty is a growing concern. Tussell's analysis shows UK-based suppliers have won just under £2.19bn (US$2.98bn) in AI contracts since 2018, compared with £2.28bn (US$3.1bn) awarded to US-based firms. That gap has narrowed significantly - Tussell said that "just a few months ago, US suppliers were ahead by close to £1bn [US$1.36bn]".
"Following prime minister Andy Burnham's fresh push to support UK-based suppliers and jobs, this momentum towards UK AI providers could accelerate," Tussell said.
Where the money goes
Tussell used ChatGPT to categorise the contracts according to the government's AI Opportunities Action Plan. The largest category by value is compute and infrastructure, at £1.7bn (US$2.32bn) - the physical and digital backbone for AI. Adoption and deployment follows at £799m (US$1bn), skills and workforce at £730m (US$995m), data management and enablement at £713m (US$972m), innovation and frontier AI at £653m (US$890m), and governance, management and regulation at £348m (US$474m).
Despite the headline figures, Tussell warns the scale "should not be over-emphasised (yet)". The £5bn in AI contracts still accounts for only around 4% of the total value of all IT services and software contracts awarded by the public sector since 2018, which total £123bn (US$168bn).
"If the volume and value of AI-related contracts continue to grow at their current pace, that share is likely to rise over the coming decade. For now, however, AI remains a relatively small part of overall government technology spending," Tussell said.
Government AI spending beyond the UK
The growth is not limited to the UK. In the US, the Brookings Institution reports that funds obligated for AI in the federal government's 2026 budget stand at US$7.2bn, up 966% from 2024. The total potential value of AI contracts in the budget is US$91.8bn, up 1,912%. The Department of Defense drives this, holding 1,319 of the 1,743 AI-related contracts across the federal government.
In Canada, federal government spending on AI contracts between January 2023 and March 2026 reached C$831m (US$598m), according to data released in response to a parliamentary request. That includes C$350m for workforce platform Dayforce to replace the government's Phoenix pay system and C$240m to Canadian AI company Cohere for a data centre. The true total is likely higher, as not all agencies report AI spending.
Why this matters for government professionals
AI procurement is no longer a fringe activity - it is becoming a standard part of how government buys technology. For civil servants involved in procurement, the shift means AI-related contracts will increasingly demand a working knowledge of how AI systems are priced, deployed, and governed, not just at the central department level but across local authorities and public bodies. The data also shows that the UK's AI supply chain is becoming more domestic, which could change who you work with and how contracts are structured. Understanding this trajectory now, while AI remains a relatively small part of overall tech spending, is the window to build the skills needed for the next decade of public sector work. For those looking to build these skills, AI for Government resources and an AI Learning Path for Policy Makers offer a practical starting point.
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