UK companies scale back hiring due to overspending on AI
Businesses in the UK incur a total of £3.8 billion annually in technology infrastructure overspend, with the biggest culprit being AI and machine learning spending.
This is according to new research from the Centre for Economics and Business Research (CEBR) and commissioned by Wasabi Technologies, which found that this overspending resulted in companies having to scale back spending in other areas such as hiring and new product development.
This total overspend amount reflects technology infrastructure charges which businesses could not forecast, and roughly a third of these costs are account for by AI and machine learning spending, coming to a total of £1.2 billion in the UK.
AI spending by far makes up the biggest portion of overspending in the UK, and it is the category which businesses find most difficult to forecast.
According to the research, 22% of British businesses said they found AI infrastructure costs unpredictable, with usage-based pricing in particular adding to the uncertainty.
Among those businesses that overspent on AI, more than 36% reported higher-than-expected token or inference charges, while 66% cited unexpected AI and model licensing fees, and 43% said integration and deployment expenses also contributed to their overspend.
Jobs suffering due to AI overspend
The research shows that this overspending on technology infrastructure has real knock-on effects on other areas of business operation, namely hiring employees.
“Our research uncovered the hidden cost of innovation for some of the world’s largest economies and found the economic cost of unpredictable pricing is not simply that firms pay more,” said CEBR head of economics advisory Owen Good.
“This means hiring and investment in new technologies are postponed or reduced as budgets are redirected to cover unexpected charges. The technology generating the most unplanned costs is also among the investments businesses are cutting to pay for them.”
77% of British business made at least one cost-driven trade-off in the past year, and the first budget to be sacrificed was hiring in technology, data, and AI roles, with 38% of businesses making cutbacks starting here.
The CEBR said that if companies were to recover some of their technology infrastructure overspend, that budget rebalance could support an additional 8,235 jobs, along with £1.4 billion of new productive technology investment, and £800 million in workforce training.
It estimates that if the above could be recovered from overspend, this would lead to a long-run UK GDP uplift of £1.4 billion.
