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The UK’s small and medium enterprises (SMEs) could unlock up to £78bn for the economy over the next decade through greater adoption of generative AI.
Despite the transformative potential of AI tools like ChatGPT, Copilot, and other large language models (LLMs), uptake among SMEs remains limited.
Less than one in five small businesses are currently fully adopting AI, in comparison to starkly higher adoption rates in bigger, more established firms.
Digital minister Feryal Clark dubbed the technology as a “game changer – not just for the big players, but for small businesses and communities in every corner of the UK”.
She added that it could help such firms cut various costs, reduce administrative burdens, and drive regional economic growth, provided they are granted the right support.
A burgeoning regional opportunity
A recent report, commissioned by Microsoft and consultancy WPI Strategy, unveiled the potential productivity gains in regions with strong high-growth sectors.
In West Yorkshire, for example, where digital and creative industries are expanding at high speed, widespread SME adoption of AI could generate an additional £4.6bn in economic output in the next five years.
The Liverpool City region, the research found, could also see a £2.8bn uplift.
“These are not abstract figures”, said Hugh Milward, vice president of Microsoft UK. “This is growth that should be felt in communities from Kent to Cumbria”.
Yet despite the promise, many small businesses face significant hurdles to its adoption.
According to data from the Federation of Small Businesses, despite 55 per cent of SMEs knowing the use of AI could add a huge benefit to their operations, 46 per cent admit to a lack of skill or understanding.
Cost and financial access were also revealed as pivotal concerns.
A global race
The UK isn’t alone in pursuing AI-led growth.
Across Europe, SME AI adoption rates have escalated at a dizzying pace – from 19.4 per cent in 2023, to 31 per cent in 2024.
The report warns that without targeted intervention, the UK risks falling behind other innovation leaders such as Denmark, or the Netherlands.
This comes amid fears of a tech exodus across the country, as many in the industry question the long term competitiveness of the tech ecosystem in the UK.
Naomi Weir of the Confederation of British Industry, warned: “The UK has a huge opportunity to lead, but only if we act now to make AI accessible for all businesses – not just a few”.
Sue Daley, director of technology and innovation at TechUK, urged policy makers to act swifty.
She said: “If the government wants to make the UK more globally competitive, empowering SMEs to adopt AI must be a top priority. That means tackling the digital skills gap and improving access to finance”.