The recent tightness in the UK’s labour market has impacted the country’s economic growth and the resulting spike in wage costs has also contributed to the core inflation number that keeps central bankers awake at night.

There has been much discussion about potential solutions to labour issues, from increased migration to more technological methods: automation, robotics and AI (artificial intelligence).

Recent advances in the latter have fuelled the imagination and sparked investor interest with tech players enjoying something of a renaissance as search engines become more intuitive and chips and processors become more responsive.

BT (BT.) recently announced it was looking to replace about a fifth of its customer service workers with AI and there have been warnings that ‘Tomorrow’s World’ could see more than 300 million jobs at risk.

UK prime minister Rishi Sunak has promised the country will take a leadership position when it comes to these sweeping technological advancements, and it was hot topic at the recent G7 summit. But it led me to ponder exactly what roles can’t be filled by tech.

ROBOTS IN REAL LIFE

On a recent trip to Belfast my pre-flight airport burger was delivered to me by a very polite, very speedy robot. Only the accompanying glass of wine couldn’t be handed over, a real person had to check I was legally of age to imbibe.

But how long before that robot is kitted out with facial recognition software that can scan my all too visible crow’s feet and decide I am ‘of age’ – perhaps a better question is how long will it be before the law allows it?

Robotics and automation have a huge initial outlay so there has to be a real monetary gain in order for businesses to make this investment. At Belfast there are times the airport is almost empty and other times when every seat seems to be taken.

Paying for workers to stand around for hours makes little sense and few people are willing to turn up for a shift that’s just an hour or two long.

But robots don’t always provide the solution that business needs. The first incarnation of ‘Flippy’ the burger cook was turned off after just one day at the stove because it was too slow and required too much human assistance.

And a bakery in Barnsley made headlines back in 2009 when it turned on its robotic helper, which it hoped would decrease energy use and increase capacity in its ovens by 80%. The only problem was it just couldn’t stand the heat and when I returned to film at the bakery a few months later I found it had been quietly retired.

THE INVESTMENT PERSPECTIVE

There will be many examples of failures and no investor wants to end up wearing the emperor’s new clothes or finding themselves in the next dotcom bubble when it bursts.

Sector-specific ETFs (exchange-traded funds) are one way to get exposure while remaining diversified and increased headlines haven’t hurt the share price performance of three options since the start of the year (see table).

Like those EV start-up companies, robotics and AI operations can burn through capital to take an idea from the drawing board and into mainstream production. The aforementioned Flippy has since been reborn and Flippy 2 started service in the US in 2021 just as the post-Covid labour crisis was at its peak.

Retail investors cannot currently invest in Miso Robotics, the company behind Flippy 2 but the ETFs mentioned in the table have a wide variety of global players in their portfolios including Keyence (6861:TYO) and ABB (ABB:NYSE).

REPLACING HUMANS

The potential for the robotics and automation space is huge, especially at a time when migration is such a political hot potato.

Food growing, picking and production is an obvious area for investment and a new funding round has just gone live to allow businesses to invest in new technologies that could fill skills and staffing gaps and ultimately help bring prices down for the consumer.

AI has further changed the game and there are now super-smart robots (named Tom, Dick and Harry) that can identify and zap weeds among crops which means the need for fewer herbicides, and prototypes have been created that could ultimately solve the crop-picking crisis.

Right now, like Flippy’s first incarnation, those prototypes can’t match the speed of human hands and a review last year into automation in farming found that it’s likely to take at least another five to seven years before the prototypes move to commercially-available options.

Productivity investment in robotics, AI and automation seems like a total no-brainer, but there are questions about the ultimate impact this shift will have on the global labour force. What jobs will be safe, what jobs will be created and what jobs will disappear from our vacancy lists?

Governments will have to step in to regulate this space and that’s something companies and investors will have to watch closely. But it seems ‘Tomorrow’s World’ is really upon us and rather like the internet before it, I doubt anything is likely to slow it down.

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