Artificial intelligence (AI) refers to a range of technologies that enable machines to perform tasks typically associated with human intelligence, such as learning, reasoning and problem solving. While there is no single agreed definition, AI systems generally use large datasets and algorithms to identify patterns, generate outputs and support decision-making. 

AI is increasingly recognised as a strategically important technology for the UK economy. It is positioned as a key driver of productivity, innovation and growth, with applications across sectors including healthcare, manufacturing, financial services and public services. This underlines its importance not only as a standalone sector, but as an enabling technology embedded across the wider economy. 

When analysing AI at a regional level, it is important to distinguish between different levels of activity. Some firms are dedicated AI companies, where the core product or service is based on AI development. Others are AI-enabled businesses, using AI tools to improve existing processes or services. National evidence highlights this distinction through the categorisation of “dedicated” and “diversified” AI firms, reflecting the breadth of AI adoption across industries. 

Measuring the size and performance of the AI sector remains challenging. AI does not sit within a single Standard Industrial Classification (SIC), and current official statistics frameworks only partially capture AI-related activity. As a result, national studies rely on experimental approaches to identify AI firms and activity across multiple sectors. In addition, updates to SIC classifications are still being implemented, meaning that emerging technologies such as AI are not yet fully reflected in published datasets. 

Despite this, the North East is developing a growing role within the national AI landscape. The region has been designated an AI Growth Zone, with investment expected to support both the development and adoption of AI technologies. 

A key strength of the North East lies in its emerging data centre and digital infrastructure, including major developments at Blyth and Cobalt Park. These sites are expected to form part of one of the largest data centre clusters nationally, while the evidence base is still developing, these foundations position the region to play an increasing role in the UK’s evolving AI ecosystem. Due to limitations in regional data availability, national-level data is used where necessary to provide context on sector structure and broader trends.

The North East’s AI business base is still relatively small, but there are clear signs that activity is beginning to build. Recent estimates from The Data City shows there are around 78 AI businesses in the region. Nationally, the pace of growth has been striking. The number of AI businesses in the UK increased by 58% between 2023 and 2024, pointing to a sector that is expanding quickly and becoming more embedded across industries. This wider growth matters for the North East, as it suggests that regional activity is likely to continue evolving as adoption increases and new businesses emerge.

Within the region, around 33% of AI businesses show some form of growth signal, which points to ongoing investment, scaling activity or improving market position. That said, the base remains relatively concentrated, and much of the impact is likely to come not just from dedicated AI firms, but from how AI is taken up by existing businesses across sectors such as manufacturing, health and energy.

National evidence suggests that around 29% of AI businesses are SMEs, highlighting the role of smaller and early-stage companies alongside larger, more established firms. In practice, this mix tends to support both innovation and scale, with smaller firms often driving new ideas and products, while larger organisations are better placed to roll them out more widely.

Across the UK, AI employment has grown significantly, increasing by 33% between 2023 and 2024. This points to a sector that is not only expanding in terms of businesses, but also generating jobs at pace. As with the business base, this national growth is likely to influence how employment develops in the North East over time, particularly as adoption spreads across more sectors.

Within the region, there are also clear signs that employment is concentrated in businesses that are actively growing. An estimated 87% of North East AI employees work in firms showing some form of growth signal, suggesting that much of the workforce is tied to businesses that are scaling, investing or expanding their activity. This reinforces the idea that, while the overall base is relatively small, a significant proportion of activity is dynamic and forward-looking.

Looking more broadly at the structure of employment, national evidence shows that 36% of AI employment is in dedicated AI firms, compared with 64% in diversified businesses. This highlights the importance of wider adoption across the economy , most AI-related jobs are not confined to specialist tech companies, but are embedded within larger organisations using AI alongside other activities.

The economic value generated by the UK AI sector has increased rapidly in recent years. AI GVA more than grew by 103% between 2023 and 2024. While larger businesses account for the biggest share of AI-related economic output, SMEs contribute around 40% of dedicated AI GVA, demonstrating the important role that smaller and scaling businesses play in driving innovation and creating economic value within the sector. 

Much of the commercial value associated with AI comes from its application across existing businesses. In 2024, around 79% of AI-related revenue was generated by diversified firms, rather than businesses whose primary focus is AI. Revenue from these firms also grew by 96% between 2023 and 2024, underlining how AI is increasingly being adopted across a wide range of industries and business models. 

While regional data on AI-related GVA and revenue remains limited, national trends indicate that growth is being fuelled both by innovation within dedicated AI firms and by the increasing use of AI technologies across established businesses.