Small businesses could unlock significant productivity and revenue gains from artificial intelligence, but widespread concerns around trust and risk are holding many firms back, according to the Federation of Small Businesses (FSB).
The business group is calling on the government to provide clearer guidance and reassurance to SMEs as AI becomes an increasingly important part of the economy.
Its latest report found that 59% of small businesses already using AI have experienced productivity improvements, while almost a quarter – 24% – said the technology had helped increase revenue.
Despite those benefits, confidence remains a significant barrier. The research found that 92% of small firms still have concerns about using AI, particularly around data security, copyright and who would be liable when things go wrong.
The FSB believes the appointment of Kanishka Narayan as the government's new AI Minister presents an opportunity to address those uncertainties and encourage more small businesses to adopt the technology.
For many SMEs, AI tools could offer practical benefits, from reducing administrative workloads and improving customer service to supporting marketing and helping businesses work more efficiently with limited resources.
However, the FSB argues that businesses need greater certainty before they can embrace these tools with confidence. Clearer rules around how data can be used, ownership of AI-generated material and responsibility for mistakes could help remove some of the barriers currently preventing adoption.
Tina McKenzie, Policy Chair at the FSB, welcomed the government's focus on AI but said many businesses are still asking fundamental questions about how the technology should be used safely and responsibly.
She said the new AI Minister has an opportunity to make the UK a leading environment for small business AI adoption, but stressed that trust must be central to the government's approach.
The findings highlight a growing divide between the potential benefits of AI and businesses' willingness to use it. If policymakers can provide greater clarity and confidence, more small firms may be able to take advantage of the productivity and growth opportunities the technology offers.
