Research has shown that small and medium-sized enterprises (SMEs) in the UK have the potential to generate as much as £78 billion for the economy over the next ten years through an increased use of generative artificial intelligence.
Even with the swift progress of AI technologies like ChatGPT, Microsoft Copilot, and other large language models (LLMs), the uptake among SMEs remains significantly low. In fact, less than one in five small businesses in the UK are currently fully utilizing AI capabilities—a stark difference compared to larger corporations, which are embracing these technologies at a much quicker rate.
Digital infrastructure minister Feryal Clark characterized AI as a “game changer – not just for large enterprises, but for small businesses and communities throughout the UK.” She emphasized that with appropriate training and infrastructure, AI could enable SMEs to reduce costs, alleviate time-consuming administrative tasks, and spur economic growth, particularly in areas traditionally overlooked for investment.
A recent analysis commissioned by Microsoft and consultancy WPI Strategy showcased the potential economic impact of enhanced AI adoption among British SMEs. The report titled “Unlocking UK productivity with generative AI” points out regional prospects in high-growth sectors where the advantages of AI could be especially significant. For example, in West Yorkshire, a region experiencing a surge in digital and creative industries, widespread AI adoption among SMEs could add £4.6 billion in output over the next five years, while the Liverpool City Region could see a £2.8 billion boost.
“These figures are not merely theoretical,” stated Hugh Milward, vice-president of external affairs at Microsoft UK. “This is growth that communities from Kent to Cumbria should notice.”
Nevertheless, numerous SMEs face challenges to adoption. A recent report from the Federation of Small Businesses (FSB) indicates that while over half (55%) of SMEs believe AI could significantly enhance their operations, nearly half (46%) acknowledge a lack of the essential skills or knowledge to use it effectively. [The FSB’s AI guide for small businesses](https://www.fsb.org.uk/resources/article/start-here-ai-for-small-businesses-MCJRFL46ML2BCKDI62Y36YMA2S7U) reveals widespread uncertainty surrounding the practical and scalable implementation of AI tools.
Financing issues present another obstacle. Many SMEs identify costs and limited access to capital as major hindrances, particularly against a backdrop of sluggish economic conditions marked by ongoing high inflation, labor shortages, and rising interest rates.
The UK’s ambitions for AI development are also set against a backdrop of increasingly fierce global competition. Data from the EU indicates that SME adoption of AI in Europe surged from just under 20 percent in 2023 to 31 percent in 2024. Meanwhile, countries such as Denmark and the Netherlands are establishing themselves as leaders in innovation, benefiting from strong governmental support and cohesive digital strategies.
There are escalating concerns that the UK might lag behind its counterparts unless swift policy measures are taken. This caution emerges amidst broader apprehensions about Britain’s technology landscape, especially following notable events like the proposed sale of Deliveroo’s UK operations, which has reignited worries of a [tech exodus](https://www.cityam.com/deliveroos-sale-reignites-fear-over-uks-tech-exodus/).
Naomi Weir, director of innovation at the Confederation of British Industry (CBI), urged policymakers to take immediate action: “The UK has a tremendous opportunity to lead, but only if we move now to make AI accessible for all businesses – not just a select few.” Sue Daley, director of technology and innovation at TechUK, echoed these sentiments, stressing: “If the government intends to enhance the UK’s global competitiveness, empowering SMEs to adopt AI must be prioritized. This includes addressing the digital skills gap and increasing access to finance.”
As enthusiasm grows around artificial intelligence, the UK’s capacity to expand its SME sector through digital innovation will be crucial—not just for future growth, but in ensuring that economic benefits are widely shared across regions, sectors, and communities.
