It is reported that 65% of public sector organisations plan to invest in at least one type of emerging tech by 2026. As such, the UK Government has recognised the need to embrace AI solutions to meet the rising demand for public services.
In our latest Technology Sector Report, one of our key themes is Public Sector Tech and how this sector is increasingly investing in technologies focused on enhancing services and reducing costs.
The NHS has embarked on a system-wide savings and efficiency drive that includes leveraging technology more aggressively, centralising procurement, back-office functions, and reducing costs in agency nursing shifts. Most recently, the Chancellor announced a £4.2 billion Public Sector Productivity Plan to return productivity back to pre-pandemic levels in the Spring 2024 Budget – around £3.4 billion of this will be ring-fenced for the NHS to invest in digital technology.
An example of this is the recent technological developments at Medway NHS Foundation Trust, which operates a hospital in Gillingham. The trust uses remote monitoring for an elastomeric pump, a device for administering chemotherapy drugs. The pump allowed patients to receive treatment at home, saving approximately 496 hospital bed days in the first ten months of use, saving almost £160,000.
The post-pandemic world has had lasting effects on the healthcare industry, with a backlog of patients and worker shortages driving costs up and service levels down. This emphasises the need for more affordable and efficient business models, which can be developed and deployed through technological innovations. Optimising the right tech within the healthcare sector, whether through digitising or data-driven innovations, will help the NHS do more with less, inevitably improving patient outcomes.
This trend is similar in Policing. Initiatives such as the AI Safety Institute, which will test new types of models before they are released, and the Covenant for Using AI in Policing, which places emphasis on the use of AI in the sector, both highlight the potential usage of technology in the sector, while recognising that a delicate balance will be needed to ensure they are applied safely and consistently.
AI trends already seen within the police force include the use of live facial recognition within the Police National Database, which enables police to move quickly to identify suspects and accurately capture those wanted for serious crimes, as well as missing people. The use of this and other AI tools work to free up police time and resources, just one of the significant benefits to law enforcement as a result of the tech industry.
The Government is also taking a leading role in ensuring that the appropriate research and investment can support tech innovations to be used in the police force, such as AI. The UK hosted its first global AI Safety Summit in November 2023, supported by the Frontier AI Taskforce which was created with £100 million initial funding to spearhead the country’s leadership in this area to become a leading hub of excellence in AI.
Within the public sector, it’s imperative that while the task to improve efficiencies and reduce budgets is key to meeting demand, it’s also key to maintain the quality of services being delivered.
The UK Government spend £400 billion annually on running public services, grants and administrations, showcasing the potential for cost savings with effective digital transformation, as well as improved services.
The Central Digital and Data Office (CDDO) was created to help improve digital transformation, making good progress since its inception to address barriers and successfully obtain £4 billion of increased funding to support digital transformation in government departments.
Early 2022 saw the CDDO share their roadmap with plans to address the root causes of the Government’s digital problems and establish a long-term ambition for a more transformed and efficient digital government.
Alongside this, personalisation and ease of access is another key factor driving change, as more and more public services are expected to offer a bespoke service that caters to an individual’s experiences and needs. This not only improves outcomes for citizens facing socioeconomic and demographic complexities, but also streamlines operations by increasing efficiency of communications and allowing the public sector to serve people more quickly and effectively.
Public sector organisations are increasingly looking to invest in best of breed cloud-based software solutions in order to optimise operations and replace ageing on-premises deployments from typically underinvested internal IT functions. The public sector technology landscape is typically highly fragmented with small, owner-managed businesses often securing high proportions of niche public sector service provisions, providing significant market consolidation opportunities. This coincides with a period of macro-economic uncertainty, resulting in investors looking to target companies with sticky and stable recurring revenues in sustainable markets.
As such, we believe that technology providers with established positions in public sector markets will become an increasingly attractive investment opportunity for both trade and institutional investors alike.
Read our full Technology Sector Report for further key trends, portfolio case studies and insights from experts across the Technology sector.