Chief Executive Officers (CEOs) are accelerating investments in generative artificial intelligence (GenAI) to maintain a competitive advantage, but most are facing challenges in developing and implementing AI strategies, according to the findings of the latest EY CEO Outlook Pulse survey.
The survey of 100 UK CEOs which provides insights on AI, capital allocation, investment, sustainability and transformation strategies found that nearly all respondents (99%) are making or planning significant capital investments in GenAI in the next 12 months, with 51% funding investments by reallocating capital from other investment budgets.
Almost three-quarters (74%) of UK CEOs believe their organisation must act now on GenAI to avoid giving their competitors a strategic advantage. Most are already taking tangible steps to imbed AI into their organisation – 54% said they had hired new talent with relevant AI skill sets, while 42% had established AI pilots and partnerships with multiple companies.
Amid this activity, 68% of UK CEOs said they felt the uncertainty around GenAI made it difficult to develop and implement AI strategies, while 30% said they were concerned about the risk of deploying AI in their organisation. CEOs are also finding it hard to distinguish AI ‘hype’ from genuine expertise – 77% said they had seen a sharp increase in companies claiming to be experienced in AI which was making it harder to identify credible parties.
Silvia Rindone, UK&I Managing Partner for Strategy and Transactions, said “UK CEOs clearly see the huge opportunities that AI offers in its ability to drive productivity and provide a competitive advantage and, as a result, are making significant investments in AI technology. However, this optimism is also tempered with caution, with many grappling with how best to implement and future-proof AI strategies. The noise surrounding AI has also hindered decision making about credible partnerships and acquisition targets.”
Despite slower economic growth in key markets and increased operating costs, UK CEOs are feeling confident about the long-term outlook for their business with 58% believing their profitability will be higher in 2024.
However, most CEOs (96%) are taking steps to mitigate the effects of headwinds – actions include restructuring or reducing their employee base (38%), shifting talent strategy towards contract or hourly workers (38%) or reducing training or development budgets (29%).
When asked to identify which risks will have the greatest impact on their organisation’s performance over the next 12 months, 46% cited geopolitical or trade tensions, 43% ESG and sustainability risks and 39% citing technology and digital disruption.
Nearly all the CEOs interviewed (92%) said they expect to actively pursue a strategic transaction in the next 12 months, with 48% looking to enter strategic alliances or joint ventures, 45% looking to divest and 29% looking to M&A.
Rindone continued “Despite economic headwinds, strategic transactions remain a priority for UK CEOs particularly when it comes to accelerating technology innovation. With new technologies emerging and maturing rapidly, we’re likely to see an acceleration in investment in digital assets – such as AI capabilities – leading to more transactions as companies look to either reinforce their market position or gain a competitive advantage.”