The pace of artificial intelligence (AI) development has accelerated over recent years, with the rise of generative AI chatbots attracting widespread attention. The First Minister has said “There can be enormous benefits to the economy in establishing the tech and wider infrastructure here in Wales”.
Ahead of the Plenary debate on the Economy, Trade and Rural Affairs (ETRA) Committee’s report on AI and the economy on 24 September, our article gets behind the hype and explores what increased use of AI technologies might mean for the Welsh economy, businesses and workers.
The graphic below explains some of the key terms used in this article.
What does the Welsh AI sector look like, and to what extent are businesses using AI technologies?
Recent research produced for the UK Government shows the number of AI companies in Wales doubled between 2022 and 2024. However, only 1.4% of registered AI company office locations in the UK are based in Wales.
The Office for National Statistics found that 21% of UK businesses were using AI technologies in June 2025, twice as many as when they previously asked in September 2023. A further 14% were planning to adopt some form of AI technology in the next three months.
However, a survey last year by the Open University and British Chambers of Commerce found over half of Welsh businesses were not confident about applying new AI technologies. The UK Government’s Technology Adoption Review found that key barriers to businesses adopting AI technologies include financial constraints; lack of workforce and management skills; lack of awareness of technology and its benefits and risks; policy and regulatory uncertainty; and lack of access to technological infrastructure.
The ETRA Committee heard about the importance of providing practical support to businesses interested in using new AI technologies. Professor Rossi Setchi of Cardiff University highlighted that “what we need is practical help, practical advice” to help businesses translate ideas into something tangible.
AMPLYFI, an AI-powered market intelligence company located in Cardiff, called for a clear strategy in three areas where Wales is “doing most of the right things”, “we're just not doing them in a joined-up and strategic way”:
There are essentially three pillars that any sector needs to flourish. The first is access to talent, the second is access to capital, and the third is access to market.
What impacts might AI technologies have on economic growth and productivity?
There is a widespread view that AI technologies offer the potential for significant productivity improvements. Research by PwC for the UK Government estimates increased productivity resulting from emerging technologies will contribute approximately 8.4% to real GDP by 2035. Professor Alun Preece of Cardiff University believes increased productivity will result from ‘intelligence augmentation’ – “allowing people to do more with the resources that they have, rather than be put out of a job”. Trades Union Congress (TUC) Cymru argues that productivity could be improved as long as workers are part of the conversation, and suggest this could lead to shorter working hours.
On 17 September, the UK and US governments agreed a tech partnership, announced during President Trump’s state visit to the UK. Alongside the agreement, US tech firms also announced a collective investment of £31 billion in the UK AI sector. The UK has been active in trying to secure US investment, as well as announcing partnerships with technology companies such as OpenAI.
The UK Government is creating AI growth zones to support investment in data centres. The First Minister said that Wales is “uniquely placed to benefit from the AI infrastructure plans, with work already underway to develop tech hubs, shared resources and data centres”. The UK Government estimates Wales’s data centre capacity is higher than that of any English region except London, and there are plans for further data centre construction. The UK Government will announce a site for an AI growth zone in Wales by the end of 2025.
There are concerns about the energy and water consumption of data centres, and the House of Commons Library has summarised these, along with potential responses. The UK Government has set up an AI Energy Council to “explore how the government’s AI ambitions can be powered with responsible, clean energy sources”. However, the UK Government joined the US in refusing to sign the Paris declaration on inclusive and sustainable AI.
What impacts might AI technologies have on workers?
Research commissioned by the UK Government suggests that by 2035 “around 10 million [UK] workers will be in roles where AI will be part of their role or responsibilities in some form, with a further 3.9 million in roles directly in AI”. A recent poll by the TUC found that 60% of Welsh respondents were concerned about the impact of AI and new technologies on their job.
There are mixed views on how AI technologies will affect employment. The Institute for the Future of Work’s Pissarides Review surveyed over 1,000 UK firms, and found that 78% of firms who had adopted new technologies said they had created jobs, while 55% said new technology had replaced or eliminated jobs.
However, the Institute for Public Policy Research says 4.4 million jobs across the UK are at risk due to generative AI, rising to 8 million jobs in a worst-case scenario. It says this impact will initially be felt by administrative roles, mainly performed by women, with higher-paying jobs more likely to be affected later on.
The Equality and Human Rights Commission says bias and discrimination can occur throughout the recruitment process when AI is used, for example through targeted online job advertising to source applicants, and in candidate selection. Professor Lina Dencik of Goldsmiths, University of London, has also noted the potential for managerial use of AI technologies to entrench or create inequalities, such as data-driven technology being used to ‘manage out’ older workers. The Workforce Partnership Council, a tripartite body comprised of devolved public sector employers, unions and the Welsh Government, has produced guidance on managing technology that manages people.
Businesses and trade unions agree on the need to prioritise training and skills development for AI technologies. TUC Cymru suggested the Welsh Government should support workforce AI training, focused on “how AI works, what the risks are, what questions to ask, the importance of having a human responsible for the decisions it takes”. Similarly, FSB Wales said:
…there's an interest in adopting AI tools, but we also know that there's a high level of poor digital literacy in Wales as well, so looking at how our education institutions can now meet the demand of the economy, meet the demand of our firms is really, really key.
The First Minister said that the Welsh Government will offer “Cutting-edge AI and digital skills in every Welsh secondary school”, and will develop AI centres of excellence with partners to support a just transition for workers.
What’s next?
AI is a fast-moving field and, as the AI opportunities action plan developed by Matt Clifford says, “No one can say with certainty what AI will look like a decade from now”. How the Welsh and UK governments respond to developments over the coming months and years will be critical for the economy and society.
You can watch the debate on the ETRA Committee’s report live on Senedd TV.
Article by Maddy Phillips and Gareth Thomas, Senedd Research, Welsh Parliament.
