If you had looked at the economic geography of England in the early 1700s, you might have concluded it had two great strengths: first, its thriving ports and trading centres – London, of course, already well on its way to being the most populous city in Europe, which it became when it overtook Constantinople a century later – as well as towns like Bristol, Liverpool and Portsmouth; and second, its rich agricultural hinterland which made it a top exporter of wool and textiles. Very little would have indicated that within a century, the economic geography of the country would be transformed, with new cities springing up around entirely new industries. 

That transformation was driven by a new technology, the steam engine. Originally introduced as a pump in 1698 by Thomas Savery, it was refined and adapted over the following decades. First it drained mines; later, it pumped water to keep water wheels turning before eventually replacing them. In time, it came to power industry, replacing manual labour and speeding up the pace of work. Most significantly to this country’s economic geography, it made proximity to ready sources of fuel in the form of coal fields more important than access to the oceans. The great industrial cities of the Midlands sprang up and over centuries the port cities became relatively less important, except for London. 

Technologists are saying loud and clear that AI will have an impact on our economy no less transformative than that of the steam engine. Just as someone in the late 1600s might have found it impossible to imagine the rise of Manchester and Birmingham, it’s not easy for us to imagine what that future might look like – but we can try. 

To start with quite a literal comparison, the ‘steam’ of the 21st century will be computing power. Four of the biggest companies in the world – Alphabet, Microsoft, Amazon, and Nvidia – have gone all-in on building cloud computing capabilities that will be the foundations for an AI-powered world. As the demand for compute increases, the race for ever more sophisticated processing hardware will make today’s cutting edge capabilities widely available, just as smartphones have gone from expensive and exotic to ubiquitous and cheap.

As AI spreads, it will transform society in ways that, at first glance, might seem unlikely or difficult to connect. Thomas Savery couldn’t have foreseen railroads, or how trains would make long-distance travel vastly more accessible, which in turn changed where we live (many of us in far-flung villages and suburbs). These future AI-driven transformations won’t be driven by the tech giants of today, but by entrepreneurs who find new applications that you and I haven’t even thought of and who are able to develop AI-powered services that customers actually want to use. 

Just as steam transformed economic geography, AI will transform it yet again. The past decades have seen the lingering consequences of deindustrialisation as cities in the Midlands and the North struggled with a trifecta of low wages, low investment, and low growth. London, by contrast, has thrived, attracting a wave of talent and investment from all over the world. This has led to profound economic imbalances across the UK, with the vast majority of startup investment flowing to the Golden Triangle – London, Oxford, and Cambridge – and not to the investment-starved regions. 

AI won’t replace the missing investment the left-behind parts of this country so badly need, but it can do many other things. London’s gravitational pull is closely tied to agglomeration effects for particular industries – particularly finance and technology – as well as the value of physical proximity. With remote work generally more accepted in the aftermath of the pandemic, we will feel the impact of AI tools that touch every aspect of how we do our jobs. Once you’re able to do anything from analysing data to creating full-length videos and writing working code based on nothing more than typing a prompt into a text box, it’s going to change your relationship not only to going into the office but how you live. 

Despite London and the Golden Triangle’s dominance in areas such as media, entertainment, life sciences, and finance, much of the country’s most valuable industrial assets – such as high-value manufacturing and clean energy – remain concentrated in the Midlands and the North. These are industries that are already seeing some of the biggest gains from AI as they build highly intelligent, data-driven solutions to challenges such as reducing energy waste across our grid or reducing carbon emissions in manufacturing. As those breakthroughs feed through to the rest of the economy, we will all benefit – and we will see that AI has unlocked the potential of what was right in front of us all along. 

This essay first appeared with PIMFA (Personal Investment Management and Financial Advice Association) ahead of their 2023 Senior Leadership Conference.

Header image created with Adobe Firefly from the prompt “The Steam Engine of the 21st Century – Why AI Will Change the Geography of Opportunity, a pic”