Small businesses need more support with artificial intelligence if UK economy is to truly benefit [REPORT]

More than half (57%) of the UK's small and medium-sized business (SMBs) are naturally exploring artificial intelligence (AI) to run their business, but there's an emerging skills and confidence gap that the industry must address if founders are to truly benefit from adoption of the technology, a new Enterprise Nation report has found.

Natural fit for business: What UK entrepreneurs really think about artificial intelligence found that around 60% of businesses said they were 'excited' to use AI to save time, with one in five saying they were using it to support improvements to marketing campaigns.

But skills and confidence also play pivotal roles in how tech transforms businesses, and both were found to be low surrounding AI in the report.

The report also found that confidence varies dramatically between male and female-led businesses on every scale from 'not at all confident' to 'totally confident'. The survey showed just over a quarter (26%) of male-led firms said they were 'totally confident' in using AI for their business, yet only one in ten (9%) female respondents felt the same.

Female-led firms were twice as likely (21% vs 11% male-led companies) to say that a lack of understanding was holding back their adoption of AI, but it also worth noting that a greater proportion of women actively wanted training and skills development (69% vs 62%), demonstrations (58% vs 48%), and regulation to make AI safer (52% vs 36%) compared to men. The responses suggest female entrepreneurs can see AI's potential, but want to explore it in a more considered way.

The report follows the launch of a new generation Tech Hub, which is a universal one-stop-shop solution for the UK's 5.6m SMBs, and will be discussed at an event today in London hosted by Google and addressed by the minister for technology Saqib Bhatti MP.

Enterprise Nation's Tech Hub is supported by market leading technology companies Sage, Google, Vodafone UK, Dell, Square and Cisco.

Saqib Bhatti said:

"AI is a transformational technology, and with over half of small and medium businesses across the country already using it, it’s clear we're well on our way to a new digital era.

"We are investing £3.8bn in skills in England by 2025, ensuring businesses of every scale have the talent to leverage AI's full potential.

"And through initiatives like our AI Opportunity Forum, we are equipping entrepreneurs with the skills, confidence, and resources they need to fully utilise AI, helping to deliver stronger growth and better jobs across the country."

Katie O'Donovan, director of government affairs and public policy at Google, said:

"It's brilliant to see that so many of the UK’s small business owners are excited to explore how AI could help them transform their businesses.

"To support entrepreneurs who are unsure of where to start with this incredible technology, we launched our new AI-focused training series the 'New Fundamentals' which equips people and business owners with the skills needed to boost their businesses and unlock growth.

"The pace of AI innovation means digital skills training is more important now than ever, and we’re excited to be working with Enterprise Nation to enable business owners to harness the benefits of AI."

Aine Rogers, managing director of small and medium enterprise at Cisco UK and Ireland said:

"AI will soon be pervasive amongst businesses of every size. Tech Hub's latest research clearly demonstrates the appetite of SMBs, the backbone of the UK economy, to embrace its multiple benefits.

However, to bridge the current skills and confidence gap to meet business owners' AI ambitions, the government and industry must work together to deliver critical investment, innovation, and education. Cisco is proud to play its part in empowering organisations to unlock the value of AI through its technologies and learning opportunities, delivering simple, seamless, and secure work experiences."

Emma Jones CBE, founder and CEO of Enterprise Nation, said:

"Entrepreneurs are fuelled by disruption, and the UK’s community of start-ups, and micro and SMBs are no exception. Following the Covid-19 pandemic, a turbulent global economy, and an uncertain political context, the UK’s SMB community would be forgiven for sticking with what they know.

"But this is not the case. They are powering through these tough times, and they are excited to use new technology like AI to open opportunities - and on a very pragmatic level – to unlock time.

"Small business founders are more than anything else, time poor. They see AI as the key to increasing the efficiency and speed with which they can fly through things like marketing campaigns and social posts.

"But they need more support to do so, and this report also highlighted a different approach from female founders and their male counterparts.

"Women are craving information and practical demonstrations and they want the reassurance that AI is safe to use. These are not unreasonable demands, and the industry must be prepared to invest in new training programmes designed to introduce small business owners to emerging technology and to ease their concerns where legal reasons are stopping them from using the tech effectively."

How are small businesses using AI?

The report found small firms are embracing the latest developments in generative AI to launch their own chatbot to answer customer questions more efficiently (18%) and using social media analytics (10%) to deliver deep insights into their audience or future audience.

The technology that proved most useful was Google Gemini or Chat GPT to support content creation. The least popular was machine learning predictive analytics, which uses historical data to calculate future sales or finances - and it was the same picture across all ages of business leaders and whether the business owner is male or female.

What was notable was that firms between three and five years were most likely to have adopted AI (65%) compared with businesses trading over five years (57%) and under a year (51%).

Enterprise Nation recommendations to boost small business AI adoption

• Reward businesses for adopting technology with new financial support.

The UK offers some tax-based incentives for software expenses, and a credit for the cost of developing software in-house. The financial benefits of these measures are often limited, aren’t tailored to individual businesses' needs, and aren’t provided within broader packages of support.

To overcome these challenges, the UK should look to leading tech powers like Singapore with its Go Digital programme and South Korea with its Digital New Deal.

• Offer targeted tax incentives, and time-limited subsidies, to support businesses with the cost of adopting AI and technology

The UK’s Help to Grow: Digital (H2GD) scheme offered subsidised software licences across a small number of use cases, but was closed early due to a lack of uptake.

If it was better targeted to more contemporary tech use cases (determined through regular review by subject-matter experts) and extended to smaller businesses, a revamped H2GD scheme could help drive adoption through reducing the upfront cost. Government should consider offering enhanced tax reliefs for expenditure on digital services.

• Invest in new training programmes and support designed to introduce small business owners to emerging technology, and to ease their concerns where legal reasons are stopping them from using the tech effectively

The UK government coordinates and funds a wide range of initiatives aimed at addressing tech skills deficits in workplaces, including Skills Bootcamps, the Digital Skills for Work programme and the Digital Skills Council. It also invests in business training and accreditation for specific use cases like cyber security through the Cyber Essentials programme.

What's missing is a programme of activity similar to Cyber Essentials, directed at business owners using tech in other areas where concerns around keeping to regulations might introduce a 'confidence threshold' for effective use – even if adoption rates are high.

• Ensure the Department for Business and Trade's Digital Taskforce considers AI adoption for start-ups, micro, small and medium-sized businesses

The government’s Digital Taskforce should consider the potential impact of developing resources and educational tools for smaller businesses, addressing their unique concerns and needs regarding AI adoption.

• Launch campaigns to promote the benefits of using AI for small business owners to help increase female founders' adoption of AI

The tech industry has an important role to play in building business owners’ confidence with adopting new tools. New campaigns for demystifying technology in emerging areas like generative AI can simplify complex jargon, provide accessible information, and make it easier for business owners to take those first steps.

This could involve creating informative content, webinars and case studies/role models showcasing how businesses in similar industries have benefited from adopting tech.