Only one in five small businesses regularly use AI, major new research finds

Today, to mark London Tech Week, we are publishing the clearest picture yet of how UK small businesses really use technology.

The new research from Enterprise Nation’s Tech Hub, in partnership with Google, Sage, Dell Technologies and Square, has found that only one in five of the UK’s 5.7 million small businesses are using AI regularly, indicating a widening gap as larger businesses race ahead.

It found that while small businesses have broadly adopted everyday digital tools, real AI use remains at an early stage. Unlike AI outliers like Denmark, where adoption in young enterprises sits at 42%, according to the IMF, just 21% of small businesses in the UK use AI regularly, including only 6% that have embedded it into daily work across the business.

By contrast, 57% of SMEs now describe themselves as highly or moderately digital, showing that the next challenge for the UK is not basic digital awareness, but helping firms turn digital familiarity into meaningful AI adoption – or risk lagging further behind other nations.

It is the government’s ambition to see the UK become the country adopting AI the fastest in the G7.

On comparable measures, our small firms are mid-table among advanced economies: level with the EU and the United States, but behind the Nordic leaders, where over a third of firms use AI. Our 21% sits alongside the government’s own research, which puts adoption at around one in six. The risk is not that we have fallen behind, but that we drift while others pull ahead.

Chancellor of the Exchequer, Rachel Reeves, said:

“We know that many businesses want to use AI but don’t yet have the tools, support or confidence to do so – holding back productivity and growth.

“That’s why this week we announced a major nationwide boost for AI adoption – from a £200 million investment in training, to agreements with trade unions to train workers, support small businesses and open up opportunities for young people.

“New advisory Growth Labs and industry-led AI Adoption Plans will also support firms. Our economic plan is the right one, and it puts AI and innovation at the heart of driving growth and national renewal.”

What I find interesting is that this gap is not about willingness. Among the firms that have started with AI, two-thirds say their use has grown in the past year. Once founders try it, they tend to keep going.

The worry is who has not started. The smallest firms are furthest behind, with 34% of one-person businesses using AI against 68% of larger ones. Left alone, that is a divide that quietly widens.

Polly Dhaliwal, COO of Enterprise Nation, said:

“Small businesses are where the UK’s AI ambitions will either become economic growth or remain a policy aspiration. Our research shows firms are already embracing digital tools, but many have yet to make the leap from experimenting with AI to using it regularly and confidently. There is a real risk of a new divide opening up between businesses already benefiting from AI and those that have not yet been able to unlock its potential.

“For small firms, even a few hours saved each week can be transformative, boosting productivity, growth and resilience. If the UK wants to lead on AI, support must reach the millions of small businesses that power local economies and create jobs.

"The opportunity is enormous, but unless more firms are given the confidence and support to adopt AI, the benefits will be concentrated among a relatively small group of businesses rather than shared across the wider economy."

Across the country

It is uneven across the country, too. London and Scotland are out in front on AI, while places like the North East are further back. Where a business is based should not decide whether it gets to use these tools.

What holds firms back will sound familiar to anyone running a business. Cost comes first, named by 53%, and a lack of skills follows at 46%. Many simply want to see proof that it works before they spend.

None of that is a failure of nerve. These are practical, solvable problems, not a refusal to change.

Time is the other quiet barrier. More than a third say they cannot find the hours to learn and set new tools up. When you are running everything yourself, that is completely understandable.

Enterprise Nation member Kirsty Lockwood runs a specialist upholstery micro business from Knighton in Mid-Wales, serving both local and national clients. What started as a traditional craft business has been transformed through her strategic adoption of artificial intelligence tools. 

Kirsty discovered AI's potential through Google's Digital Garage workshops. 

She said:

"I have to be everything for the business, and I have to be an expert in everything."

"For 15 years, I have had to compromise on parts of the business and not spread myself too thin. I have often found that if you don't know what you are looking for on the traditional internet search, you don't get good results back." 

The breakthrough came when she realised AI could bridge that knowledge gap.

"Now suddenly I can say to AI: this is what I want to achieve, this is the information I do know and the parameters that I have got. Help me with the rest."

AI guided her through choosing the right business structure, creating governance documents, and even helped develop a £30,000 National Lottery grant application. 

She continued:

"It answered all of the questions I had and then went a stage further, asking me, 'Have you thought about this governance document? Would you like me to help you write that policy?' I was literally having a conversation with it.”

The bigger picture

There is a bigger picture here, and it matters to all of us.

When small firms adopt the right tools, they tend to grow faster, keep their people, and weather hard times better. Multiply that across the country, and it is one of the simplest routes to growth we have.

There is real encouragement in the detail, too. When small firms do adopt AI, the gains are not just for the big players. Among the smallest firms using AI, more than a quarter say it saves a typical member of staff five hours a week or more.

The uses are refreshingly down to earth. Founders reach for AI to do research, to write and tidy up content, and to make sense of their numbers. These are practical uses, not hype.

When a small business wants advice on technology, 64% turn to their accountant and 56% to an online search. Just 22% would turn to the government.

It's clear that trusted, practical help is not reaching founders through official channels. If we want adoption to rise, we have to meet people where they already are.

Jon Walkington, director of sales training business Sales Geek's Greater Manchester division, has spent over 20 years in sales leadership and consulting. He's witnessed firsthand how AI can transform business operations when implemented strategically.

The company provides fractional sales directors to businesses that need affordable specialist sales expertise but can't justify a full-time hire. It uses sophisticated AI-powered tools that most companies couldn't justify developing or deploying internally.

Jon explained:

"We use AI on a daily basis.

"It's now deeply embedded in our methodology, and has had a very positive impact on the businesses we work with."

The company recently launched YSD Core, an AI-enabled evolution of the firm's Your Sales Director framework, strengthening the impact, consistency and capability of its fractional sales director services.

And on that note

We published this to mark London Tech Week, and for one simple reason. We wanted an accurate, honest read on where small firms really stand on digital and AI. It is also exactly why we built Tech Hub.

Tech Hub gives every small business one free place to find the right digital and AI tools. You answer a few short questions, get a plan made for your business, and get guides, webinars and expert support to act on it. We built it with Google, Sage, Dell Technologies and Square, and nearly 90,000 people have already used it.

The thought I would leave you with is a hopeful one. The hardest part, getting comfortable with digital tools, is largely behind us. AI is the next step, and it is more within reach than the headlines suggest.

You do not have to take that step alone.

Read the full report here

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