Organisations, both in the public and private sector, have encountered many difficulties over the last few years – Brexit, the COVID-19 pandemic and the on-going situations in the Middle East and Ukraine have led to political uncertainty, high interest rates and a cost-of-living crisis from which few have remained unscathed. Developing high-quality operational efficiency can help these cash-strapped organisations, especially when it involves the use of AI. Here we look at what a game-changer this can be and what applications it has.
When Labour won the recent general election the new Prime Minister, Sir Keir Starmer, announced that he had discovered a ‘£22 billion black hole’ in the nation’s finances. Whether this figure is completely accurate is open to debate, but it’s led to concerns that cuts will have to be made to vital public services. The NHS, for example, will run its 2024/25 budget on a planned overspend of £2.2 billion. Higher education posted a 2.4% lower-than-expected surplus due to a freeze on domestic undergraduate tuition fees and a drop in non-EU international students. And in the public sector, Labour’s plans to continue the previous government’s spending plans mean that there’ll be a real-term spending cut of 2.4% leading to ‘tough decisions’ having to be made.
In the private sector there were 25,158 registered company insolvencies in 2023 – the highest level since 1993 – with construction topping the ‘financial distress’ index. Almost 6,000 construction businesses were on the brink of bankruptcy in October 2023, according to Construction News, which based its figures on research from insolvency practitioner Begbies Traynor. Over half a million other companies were facing ‘significant’ financial distress according to the same research, an increase of over 30% on the same figures the previous year with food and drug retailers and general retailers being affected most, after the construction industry.
For organisations with limited budgets, it can be difficult to maintain service quality. Operational efficiencies such as getting the most from staff, time and available resources must be introduced to reduce costs, ensure continuity and prevent failure. One way to achieve this is to integrate AI and technology into systems and processes. Let’s take a look at some sectors to understand how this can be achieved.
The NHS: with a budget of £181.7billion in 2022/23 in England alone, the NHS is the largest recipient of public funds in the UK, making up 18.3% of the £1,155 billion of total managed expenditure (2022/23), followed only by social security (pensioner) at 12.2%. However, it’s clear that by using AI and technology, efficiencies can be made, which will allow resources to be allocated to areas of greatest need.
The NHS has been an early adopter of the use of AI, with initiatives in back office and patient-facing functions designed to save money and increase efficiency. For example, there are estimated to be 8 million missed appointments in the NHS annually, costing £1.2 billion. A pilot at Mid and South Essex NHS Foundation Trust using algorithms and anonymised data led to a 30% reduction in Did Not Attends (DNAs) which it’s estimated could save £27.5 million every year in this Trust alone.
In patient-facing services virtual wards have been in existence for some years now, offering support, care, and treatment to people in their own homes who would otherwise have to be treated in hospital. Virtual wards not only offer high-quality monitoring and treatment for patients, many of whom are elderly and/or require specialist care in familiar surroundings, thereby reducing anxiety, but prevent ‘bed blocking’ and free up much-needed beds on physical wards, and also save around £742.44 per patient per day.
The public sector: in 2024-5 the Office for Budget Responsibility (OBR) expects to raise £1,139 billion from taxes and other sources of revenue – that’s the equivalent of £39,000 per household, or 40.9% of national income. It forecasts that it will spend £1.266 billion on public services, state pensions and servicing debts.
Deciding where this money will be spent is down to the Chancellor or the Exchequer but to maximise value for money and employee efficiency initiatives that use AI are becoming more widespread. A recent report suggested that AI will soon offer the potential to free up the work time of almost a third of civil servants by automating most of the mundane tasks they perform, allowing them to undertake more high-value work. AI may also help increase accuracy in routine tasks, help civil servants make more informed data-led decisions, maximise efficiency through data-driven pattern recognition and assist users of Government-facing websites through chatbots, for example.
One example was a 2019 study that used AI to analyse data from electricity meters to predict energy consumption so that heating and energy consumption could be optimised and costs and waste could be reduced. The results were able to predict the future uses and energy needs of domestic properties, suggest the most cost-effective time to use appliances and support the ‘smart use’ of heating, saving money and reducing the impact on the climate.
Higher education: in the years 2023-4 the UK government spent £7.16 billion on the higher education sector. However, the financial sustainability of the higher education sector has come into question recently, with figures revealing that 40% of higher education providers expect to run a deficit by the end of this timeframe. This has been reflected in the increasing numbers of universities closing courses and laying off staff – a move that has been much criticised and which it’s said will have a detrimental effect on the perception of the quality of tertiary education in this country.
Most universities are already using AI and technology to transform their educational, administrative and pastoral offerings and to increase engagement. AI offers the potential for highly-personalised learning as well as allowing students to offer real-time feedback and for their educators to learn more about how they are progressing. Using AI and its associated technology frees up lecturers’ time by reducing admin, allowing them to interact with their students more, and it’s being used in back-office functions such as payroll, as well as finding a role within recruitment both for students and staff. In a pastoral sense, AI enables staff to monitor their students’ moods and behaviour through a range of apps meaning that they are able to offer early intervention to support wellbeing and prevent poor mental health escalating.
Construction: despite it being one of the most successful industries in the UK, in terms of GDP, with a contribution of £32.263 million in the first quarter of 2024, the construction sector is facing a range of severe challenges, with financial difficulties and insolvencies rising exponentially, making it difficult to drive the housebuilding and industrial resurgence the UK currently requires.
AI can assist in a number of ways, increasing efficiency, improving safety and reducing costs. One of the most important areas in which it’s proving beneficial is safety, with a report suggesting that when AI is involved in construction projects there is a 20% reduction in recordable health and safety incidents. As 51 people were killed in the construction industry in 2023/4 any reduction in that number must be welcomed. AI is also helping to transform project planning and scheduling, creating optimised schedules in terms of resource allocation and reducing the risk of overruns. The amount of paperwork can also be reduced through technology with digital permits, smart workflows and optimised planning applications all improving compliance and reducing delays.
There’s little doubt that AI has become embedded in a wide range of sectors in the UK and that its uses are many and varied. Its ability to increase operational efficiency, such as we’ve described, is vital for organisations that are keen to manage costs while maintaining service quality.
For expert advice on any of the topics discussed in this blog, contact Brighter Consultancy.