The UK public sector has spent £1.4bn on AI so far in 2026, breaking previous record
AI generated image by Magnific
Public sector AI procurement in the UK is accelerating, and domestic companies have significantly increased their share of total AI contract value as the country moves to prioritise sovereign artificial intelligence. Global Government Forum delves into the data, as well as AI spending by the US and Canadian federal governments
The UK public sector awarded 2,129 artificial intelligence contracts totalling £5bn (US$6.7bn) between January 2018 and August 2026, with this year already the biggest on record for AI-related public spending.
The latest figures from the UK Public Sector AI Procurement Tracker from insights firm Tussell show that UK government and public sector organisations have awarded 453 AI-related contracts so far in 2026, totalling £1.4bn (US$1.9bn).
This surpasses the total AI contract value of any previous year, and with a quarter of the year still to go, 2026 is expected to overtake 2025 as the biggest year on record by number of AI contracts awarded. In 2025, £1.18bn was spent on 521 AI contracts.
By comparison, in 2018, UK public sector organisations spent of £69m (US$94m) on a total of 31 AI contracts.
The five largest public sector buyers of AI by overall contract value since 2018 were:
- The Met Office – the UK’s national weather and climate services authority: £1.03bn (US$1.4bn)
- The Ministry of Defence: £604m (US$823m)
- The Department for Science, Innovation & Technology: £501m (US$682m)
- The Cabinet Office: £489m (US$666m)
- NHS England: £384m (US$523m)
Only one other central government department – the Department for Health and Social Care – sits within the top 10, having spent £89m (US$121m) on AI since 2018, and at number 10 in the list. Blackpool Council, Transport for London, the University of Bristol and the University of York have spent more on AI than all but five central government departments and bodies over the reporting period.
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Suppliers – and sovereign AI
The five largest suppliers of AI to the public sector by contract value over the same period were Microsoft, Palantir, KPMG, Hochtief, and the Laboratory of the Government Chemist (LGC).
Total AI contract values in this group range from £284m (US$387m) to LGC, to £1.03bn (US$1.4bn) to Microsoft.
One of the notable contracts awarded in the last few months is a £456m (US$616m) contract awarded by the Cabinet Office to KPMG and EY to establish a National School of Government and Public Service. The contract covers civil service training across a range of areas, including digital and AI.
Digital and AI sovereignty is becoming increasingly important for governments. Tussell’s analysis shows that since 2018, UK-based suppliers have won just under £2.19bn ($US2.98bn) in AI-related contracts, compared with £2.28bn (US$3.1bn) awarded to US-based firms. Tussell notes that that difference is now “relatively small” and that “just a few months ago, US suppliers were ahead by close to £1bn [US$1.36bn]”.
“Following prime minister Andy Burnham’s fresh push to support UK-based suppliers and jobs, this momentum towards UK AI providers could accelerate,” Tussell said.
Under former UK PM Keir Starmer, the UK government launched the UK Sovereign AI fund in May.
Read more: UK government announces backing of British AI companies under new sovereign fund
Contract categories
To understand where government procurement is focused, Tussell asked ChatGPT to categorise AI contracts using taxonomies derived from the three strategic pillars of the government’s AI Opportunities Action Plan.
Though Tussell acknowledged that this model is a work-in-progress, it shows that the majority of AI-related contracts in the public sector, by value, are categorised as compute and infrastructure – i.e. providing the physical and digital backbone for AI – at £1.7bn (US$2.32bn).
The other main categories are adoption and deployment – contracts that promote the piloting and scaling of AI projects – at £799m (US$1bn); skills and workforce, at £730m (US$995m); data management and enablement, at £713m (US$972m), innovation and frontier AI, at £653m (US$890m); and governance, management and regulation, at £348m (US$474m).
What is the AI procurement tracker telling us?
The tracker shows that AI procurement is accelerating but Tussell warns that the scale of AI procurement “should not be over-emphasised (yet)”.
It said the £5bn (US$6.7bn) in AI contracts awarded by the public sector “sounds like a lot, but that still only accounts for roughly 4% of the total value of all IT services and software contracts” awarded by the public sector since 2018, which total £123bn (US$168bn).
“If the volume and value of AI-related contracts continue to grow at their current pace, that share is likely to rise over the coming decade. For now, however, AI remains a relatively small part of overall government technology spending,” Tussell said.
Read more: How should governments respond to AI agents going rogue?
Government AI procurement across the pond
The value and volume of government AI contracts has also grown significantly in the US and Canada.
Research company Brookings tracks US federal government AI spending and covers both obligated spending and potential contract value.
In May, it highlighted that the value of funds obligated to be spent on AI in the US federal government’s 2026 budget is US$7.2bn, up 966% from 2024, and that the total potential value of AI contracts in the budget is US$91.8b, up 1,912% on 2024.
AI spending in the federal government is driven primarily by the Department of Defense. The department has 1,319 AI-related contracts on its books in 2026, against a total of 1,743 across the federal government.
The total potential value of AI contracts under the department rose 1,605% between 2024 and 2026 to US$90.7bn. This represents 98.9% of total potential federal AI spend this year.
In April, the Office of Management and Budget (OMB) released figures that showed that the number of AI use cases across the US federal government had increased by 105% in 12 months. Use cases included text identification, data analytics and pattern recognition, summarisation, predictive modelling, and chatbot services.
In Canada, data released in response to a parliamentary request shows that between January 2023 and March 2026, the federal government spent C$831m (US$598m) on AI contracts. The true total is likely to be higher as not all agencies report their AI spending.
The reported contracts include C$350m (US$252m) to workforce management platform Dayforce to replace the government’s faulty Phoenix pay system, and C$240m (US$172m) to Canadian AI company Cohere to construct a state-of-the-art data centre for enhanced AI sovereignty.
Canada’s ‘National Artificial Intelligence Strategy: AI for All’, published on 4 June, included more than C$2bn (US$1.4bn) in spending for programmes to scale up AI use across the public and private sectors and to increase AI literacy.
