85% of UK AI firms lack clear focus, says IPPR report urging public funding reform

Analysis of 3,200+ firms shows few focused on solving specific societal challenges

A new report from the Institute for Public Policy Research (IPPR) suggests that the UK’s AI industry is largely dominated by companies offering generic solutions, with few focusing on clear public or sector-specific challenges.

The findings are based on a newly compiled database of 3,256 AI firms operating across the UK.

IPPR is an independent think tank focused on research and policy development across economic, environmental, and social issues. In this latest study, the organization examined how AI is currently being developed and deployed in the UK and assessed the alignment of that innovation with public goals.

According to the analysis, just 15% of firms focus on solving specific societal problems such as improving public health or delivering sustainable transport. In contrast, the majority, around 85%, develop general-purpose AI tools, many of which are aimed at streamlining internal business functions like marketing, customer service, and administrative operations.

Despite this lack of focus, the report notes that roughly one in five AI firms has received some form of public funding.

AI sector seen as missing opportunity to tackle high-impact challenges

The report argues that the UK is in a strong position to lead in AI innovation but risks falling behind if development continues to prioritize incremental efficiency improvements over targeted, high-value applications. Examples of underutilized potential include areas like predictive health diagnostics and climate-related interventions.

Health Navigator, one company cited in the report, uses AI to forecast hospital admissions and is presented as a case of technology that could support NHS goals around wait times and service delivery. But such use cases remain in the minority, according to IPPR.

Carsten Jung, head of AI at IPPR, said: “AI progress continues to accelerate at an unprecedented pace and is poised to have a seismic impact on economy and society. The government has said it wants to ‘shape the AI revolution’ but currently much of AI innovation is generic and not focussed on solving hard problems.

“Too many companies are focussed on generic process improvements rather than coming up with new, better products. And too few innovations are aimed at solving big societal problems, such as public health and climate change. This quantity over quality, profit over purpose, speed over substance, approach is a huge missed opportunity.”

IPPR outlines policy proposals for government to steer sector

The report recommends the creation of a new AI Tracking Unit within government to monitor innovation patterns and identify sector gaps. It also calls for more targeted use of public funding and procurement mechanisms to support firms that develop solutions aligned with national objectives.

Among the proposals are reforms to Innovate UK grant-making processes and a more strategic approach by the British Business Bank and other state-backed funding bodies. The government’s own procurement budget is also highlighted as an underused tool for directing innovation.

Jung added: “The dearth of breakthrough AI innovation is partly a result of innovation policy, which has often been unfocussed and risk averse. The government has many levers to steer the UK AI industry towards fixing hard problems. With a push in the right direction, UK companies could lead the world in developing AI that serves the public good—enhancing sustainability, improving healthcare outcomes, and boosting opportunity.”