Adopting AI technologies could help the UK’s small businesses to develop a competitive edge, while adding up to £78 billion in value to the UK economy over the coming decade, according to a new report.

The report, from Microsoft and policy consultancy WPI Strategy, highlights how taking up generative AI (GenAI) tools could help small businesses to streamline a wide range of tasks, drive strong creation of high-wage jobs and fuel economic growth across the UK.

According to the report, entitled Unlocking Regional Growth: The impact of AI adoption by SMEs, AI could be crucial in helping UK SMEs – which comprise 99 per cent of UK businesses – to boost productivity, innovation and competitiveness.

Parliamentary Under-Secretary of State for AI and Digital Government Feryal Clark MP commented: “Generative AI is a gamechanger, not just for the big players, but for small businesses and communities in every corner of the UK.”

“This research highlights the huge potential generative AI offers smaller businesses when they get the support they need to use it – cutting admin, saving time, and ultimately driving growth.”

However, Microsoft stress that unlocking the potential of GenAI will require “co-ordinated action” at both a national and regional level, adding that more needs to be done nationally and locally to help SMEs adopt the technology.

Hugh Milward, Vice President, External Affairs at Microsoft, commented: “Small businesses are the backbone of the UK economy, but without targeted support, the country’s ambition for growth will falter.”

“The £78 billion opportunity isn’t just a number – it’s growth that should be felt in communities from Kent to Cumbria. To unlock it, we need co-ordinated action from government, regional mayors, and industry to put the transformative benefits of AI into the hands of the people and businesses driving regional growth.”

The report highlights the regional benefits that AI adoption among SMEs could have. West Yorkshire, which has a large number of companies in high-growth sectors such as advanced manufacturing, could see an uplift of £4.6 billion by 2035. The Liverpool area could see £2.8 billion added over the next decade, while the Cardiff region could experience a £2.4 billion boost.

However, the report also noted that take-up remains slow, with fewer than one-in-five SMEs having currently adopted AI, and has not kept pace with government predictions. As a result, the report warns, smaller businesses risk losing out to larger companies that have already adopted AI.

According to Microsoft, there are numerous barriers hindering AI adoption among SMEs, including an AI skills gap and limited capacity to embed AI into their everyday work practices. In order to ensure that businesses across the UK can benefit from the opportunities offered by AI, the report sets out a roadmap for supporting SMEs on both a regional and national level.

The roadmap is based around three core recommendations:

Recommendation 1: Create regional ‘AI champions’ across the four nations and put AI at the heart of all Local Growth Plans

Recommendation 2: Pilot a regional Generative AI ‘adoption challenge

Recommendation 3: Explore incentives to drive SME digital adoption

According to Sue Daley OBE, Director, Technology and Innovation at techUK, it should be a strategic priority to increase the scale and pace at which UK SMEs are adopting AI.

She stated: “If the Government wants the UK to be more globally competitive, it is essential that we empower our SMEs to adopt AI technologies more quickly. This requires decisive action on the barriers identified in this report – including access to finance and digital connectivity.”

“By tackling these barriers, we can ensure that SMEs across all regions of the UK are more productive, more resilient, and more competitive.”