UK firms face GBP £3.8bn tech overspend on AI costs

UK businesses are spending an extra GBP £3.8 billion a year on technology infrastructure, according to research commissioned by Wasabi and conducted by the Centre for Economics and Business Research. Much of the overspend stems from charges companies found difficult to forecast.

Almost three-quarters of UK businesses surveyed said they had spent more on infrastructure than expected over the past 12 months. Among those affected, 61% said AI and machine learning infrastructure was their biggest area of overspend.

The findings suggest growing financial pressure as companies expand AI projects and other digital systems. AI and machine learning infrastructure accounted for GBP £1.2 billion, or 32%, of the UK total, making it the largest overspend category.

Businesses also said AI costs were among the hardest to predict. More than one-fifth of British companies described AI infrastructure costs as unpredictable, citing licensing, integration, deployment and usage charges.

Hiring impact

The budget pressure appears to be affecting recruitment and investment plans. Among UK organisations that made cost-driven trade-offs over the past year, 38% said hiring in technology, data and AI roles was most likely to lose out. A further 37% pointed to technology and software investment, and 34% to training and workforce development.

Overall, 77% of UK organisations made at least one such trade-off during the period. Among global businesses facing unpredictable infrastructure costs, 73% reported moderate or significant budget pressure. Of those, 36% said they had already delayed or scaled back AI, automation or data science initiatives.

CEBR modelled what could happen if provider-attributable overspend were recovered. It estimated the savings could support GBP £1.4 billion of productive investment in research and development, AI and new technology, as well as GBP £800 million for workforce training.

The same modelling suggested the recovered spending could support 8,235 jobs and contribute GBP £1.4 billion to long-run GDP. That frames the issue not only as a cost problem for individual companies, but also as a broader constraint on economic activity.

"Our research uncovered the hidden cost of innovation for some of the world's largest economies and found the economic cost of unpredictable pricing is not simply that firms pay more," said Owen Good, Head of Economics Advisory at CEBR.

"This means hiring and investment in new technologies are postponed or reduced as budgets are redirected to cover unexpected charges. The technology generating the most unplanned costs is also among the investments businesses are cutting to pay for them."

Switching barriers

The study also highlighted obstacles for businesses trying to cut costs by changing suppliers or adding capacity. It found that 84% of UK companies surveyed had experienced delays because suitable hardware or compute capacity was unavailable.

Data management issues added to that pressure. Among businesses considering a supplier switch, 91% said fragmented data environments created extra costs, while 85% said they had faced restricted or delayed access to data needed for a project or decision at least once in the previous year.

Those operational issues had practical consequences for business plans. Respondents said hardware availability and data access challenges had led 32% to reduce or delay planned hiring in technology, data, AI or innovation roles, 28% to delay or slow product development cycles, and 26% to delay or scale back AI, automation or data science initiatives.

Wasabi President and Chief Operating Officer Marty Falaro said the cost uncertainty was disrupting companies' innovation plans.

"Businesses are not short of ambition, but they are blindsided by unpredictable infrastructure costs that prevent them from driving their innovation agendas forward," said Marty Falaro, President and Chief Operating Officer of Wasabi Technologies.

"There is a fundamental problem with how technology infrastructure is bought and priced. Businesses need to know what it will cost to store, access and move their data before they commit to an AI project, not after the bill arrives. Innovation should take risks, but the infrastructure bill shouldn't."

Industry executives quoted in the research described similar pressures. Liverpool FC Vice President of Technology and Digital Product Andy Fletcher said AI spending was difficult to forecast across licensing, deployment and day-to-day operations, while tl;dv Chief Technology Officer Allan Bettarel said his company had considered moving recordings to a lower-cost storage tier before deciding against a slower retrieval model.

The survey covered 690 senior business and IT decision-makers across the UK, US, France, Germany, Italy, Japan, Australia and New Zealand, with the economic modelling carried out by CEBR. In the UK, the central finding was that unexpected infrastructure costs are reshaping how companies allocate money across AI, hiring and product development.