Small businesses could unlock more than £42bn of additional economic value each year through greater use of artificial intelligence but concerns around trust, liability and data protection are preventing many firms from embracing the technology, according to the Federation of Small Businesses (FSB).
New research from the UK’s largest small business organisation shows AI adoption among small firms has almost tripled in just two years. More than half (55%) of small businesses now use AI, compared with just 20% in 2023.
However, confidence in the technology is being undermined by growing concerns over its risks. The study found that 92% of small business owners now have concerns about AI, up from 73% in 2023.
The biggest worries include inaccurate responses (54%), security risks (39%), abuse of intellectual property rights (39%), a lack of transparency around how AI models are trained (38%), legal liability (30%) and uncertainty around using AI legally and ethically (27%).
TANGIBLE BENEFITS
Despite these concerns, businesses already using AI are reporting tangible benefits. Almost six in 10 (59%) said AI had improved productivity, while 24% reported increased revenues and 22% said it had helped grow their business. Just 8% said the technology had reduced staffing levels.
The average AI-enabled small business reported a 3% increase in revenue, leading the FSB to estimate that wider and deeper adoption could generate more than £42bn for the UK economy annually.
The organisation is now urging the Government to introduce clearer rules and stronger protections to encourage adoption.
Recommendations include standardised AI “model cards” explaining how business data is used, stronger protection of intellectual property rights, clear liability rules when AI systems make mistakes, practical support for safe adoption and tax incentives for firms investing in AI.
PRACTICAL USES
Tina McKenzie (main picture, inset), Policy Chair of the Federation of Small Businesses, says: “There is a healthy realism among small businesses when it comes to AI, and it’s encouraging to see so many already finding practical ways to use it to save time, improve productivity and grow.
“Business owners can see the potential, but they are also asking sensible questions about how their data is used, who is responsible when things go wrong, and how they can adopt the technology safely.”
EYES ON THE PRIZE
But she adds: “It’s only natural that people want to know the rules of the road before they take the leap and begin using AI.
“Small firms are looking for the confidence and certainty to use it well.
“If we can provide that, the prize is enormous. AI has the potential to help small businesses work smarter, reach new customers, develop new products and compete more effectively, unlocking benefits not just for individual firms but for the wider economy too.”
