Artificial intelligence (AI) is no longer a futuristic concept confined to works of science fiction or Silicon Valley labs. It is rapidly becoming a defining force in the global economy, reshaping industries, altering the nature of work, and challenging governments to rethink their economic strategy.

For Northern Ireland, whose productivity has lagged the UK average for decades, AI presents both an opportunity and a risk. Our new report, ‘Harnessing AI to boost Northern Ireland’s productivity’, written for the Northern Ireland Productivity Forum based at Queen’s Business School, explains how the emergence of AI is a pivotal moment for the region’s productivity.

Why productivity matters

Productivity measures how effectively an economy uses its resources to generate output. Higher productivity means higher wages, stronger economic growth, better public services, and improved living standards.

Northern Ireland suffers from a persistent productivity gap to the UK level. The most recent data shows Northern Ireland’s productivity is 12% below the UK level, placing it 8th amongst the UK’s twelve regions. This weak productivity growth is the key reason for the relatively poor performance of Northern Ireland’s economy.

Northern Ireland’s weak productivity performance is linked to several structural issues: a concentration of lower-value industries, lower rates of innovation, underinvestment in infrastructure, and skills shortages. AI could help tackle some of these issues, but only if adoption is widespread and strategic.

The workforce challenge

One of our report’s central findings is that Northern Ireland’s workforce is heavily concentrated in occupations that are both lower paid and highly exposed to AI automation. This is shown starkly in the diagram below. It shows how exposure to AI (horizontal axis) varies by occupation across Northern Ireland, relative to each occupation’s average wage (vertical axis) as a proxy for productivity, and total employment (bubble size).

The diagram shows that administrative roles, sales occupations and some routine office jobs are particularly vulnerable. Meanwhile, many higher-value sectors that could benefit most from AI – such as advanced professional services and high-tech industries – remain underrepresented in Northern Ireland’s economy relative to UK levels.

This creates a significant risk. If AI adoption mainly replaces routine middle-skilled work without creating enough high-skilled opportunities, Northern Ireland could see deeper labour market polarisation, with an even greater concentration in low-skilled occupations that are less exposed to AI but with lower potential for productivity growth.

Combined with the rapid development of AI, this means that Northern Ireland needs an AI skills strategy focused not only on technical expertise but also on adaptability and lifelong learning. Policymakers should prioritise helping individuals at all stages of their careers to continuously develop AI-related skills that remain transferable across sectors.

Management matters

Good management practices contribute to higher business productivity. Good management is also one of the most important prerequisites if a business is to effectively adopt new technologies. Famously, the information technology revolution of the 1990s resulted in much higher productivity in the United States than in Europe because of superior management practices in the former.

In the UK, an ONS survey found that a higher management practice score was associated with a stronger commitment to AI adoption.

In Northern Ireland, management practices are a strong predictor of the digitalisation of business processes. Unfortunately, Northern Ireland’s management practices are the lowest in the UK. If businesses do not address their management quality, it does not bode well for AI adoption across Northern Ireland.

SMEs and the AI divide

Northern Ireland’s business landscape is overwhelmingly made up of SMEs, with 89% of firms employing fewer than 10 people.

These businesses face a difficult balancing act. AI tools could improve their productivity dramatically by automating administrative tasks, improving customer service, and streamlining operations. However, smaller firms often lack the financial resources, technical expertise, and management capacity needed to implement AI effectively.

Our report warns that AI benefits may therefore become concentrated among larger, already high-performing firms. This could widen the gap between “frontier” businesses that successfully integrate AI and a growing “long tail” of underperforming firms that struggle to adapt.

AI and public services

Our report also highlights the enormous potential for AI within public services, especially healthcare.

Northern Ireland faces severe pressures in its health system, including long waiting lists, workforce shortages, and rising levels of economic inactivity linked to long-term illness. AI could help by automating routine administrative work, improving diagnostics, accelerating medical research, and enabling more efficient patient care.

However, achieving these gains will require major investment in digital infrastructure and public sector transformation.

A defining moment for the Northern Ireland Executive

Our report ultimately concludes that AI’s ability to close Northern Ireland’s productivity gap with the rest of the UK will depend on how effectively AI is adopted across the economy.

If policymakers fail to invest in skills, infrastructure, and business capability, AI could deepen existing inequalities and reinforce low productivity. But with the right strategy, AI could help Northern Ireland become more competitive, innovative, and resilient.

Northern Ireland does not yet have an AI strategy. Developing a strategy is a priority given both the risks and opportunities of AI for the economy.

Our main recommendation is that the Northern Ireland Executive should adopt a ‘smart second-mover’ AI strategy. Rather than attempting to become a global AI powerhouse overnight, the Executive should focus on practical, economy-wide adoption of proven AI applications that improve productivity across existing businesses and industries. Its AI strategy should be overseen by a Productivity & Growth Board, which is focused on creating the conditions for broad, economy-wide adoption rather than competing at the technological frontier.

AI alone will not solve Northern Ireland’s productivity problem. Success will depend on whether the region can build the skills, institutions, and business environment needed to use AI effectively at scale.

Ruth Donaldson is a PhD Researcher at Queen’s Business School.

Dr David Jordan is a Lecturer in Economics at Queen’s Business School, and Lead of the Northern Ireland Productivity Forum.

Seán McDonald is a Research Assistant at Queen’s Business School.

Professor John Turner is Director of Research at Queen’s Business School.

The Northern Ireland Productivity Forum is based at Queen’s Business School, and is part of The Productivity Institute, a UK-wide organisation that works across academia, business and policy to better understand, measure and enable productivity across the UK. This work was supported by the Economic and Social Research Council [Grant number ES/V002740/1].