UK Small Businesses Divided Over AI: The New Research
The latest business sentiment data paints a stark picture: UK small businesses are divided over AI in a way that no single government taskforce can easily reconcile. According to fresh research from Novuna Business Finance, 31% of UK small business owners now say they are already using AI to support their enterprises. But that leaves a substantial 48% who either have no plans to adopt it (27%) or do not regard AI as relevant to their business at all (21%).
The findings land at a delicate moment. The Prime Minister's new AI Taskforce has been created to accelerate adoption of AI across government and drive economic growth, yet the same period has produced a record low in SME growth expectations. Only 24% of small businesses predicted growth between July and September 2026, with notable downturns in construction (15%), retail (21%) and hospitality (21%). The research, based on a representative sample of 1,000 small business owners, suggests the path to broader AI adoption is far from straightforward.
Who Is Embracing AI, and How Are They Using It?
Adoption is concentrated, not universal. The Novuna Business Barometer shows that London leads the way, with 41% of small businesses using AI, followed by the West Midlands at 38%. In the other nine UK regions, a larger percentage of businesses said they did not plan to use AI or did not believe it was relevant. Professional services firms in IT, finance and legal sectors are the most enthusiastic adopters, while agriculture (46%), construction (36%) and real estate (34%) are the most resistant.
Among the third of small firms already on board, the use cases are practical rather than futuristic. The most common applications include:
- Back-office and operational process efficiency (16%)
- Enhancing online and digital marketing capabilities (15%)
- Market research and product development (14%)
- Further back-office automation (16%) and product development specifically (14%)
There is also a clear growth correlation. Some 59% of growing businesses have adopted AI, compared with just 23% of contracting firms. That suggests AI is not merely a tool for the tech-savvy; it is increasingly associated with commercial momentum, at least among those who have taken the plunge.
Why Nearly Half of UK Small Businesses Refuse AI
The resistance is not born of ignorance. The Novuna research points to a fundamental philosophical objection: 59% of non-users say their enterprises are built on strong human relationships. This sentiment is especially pronounced in the North West (76%), East Midlands (75%), Yorkshire and the Humber (71%) and the North East (68%). For these owners, AI feels like a threat to the very thing that differentiates them from larger competitors.
Practical concerns also weigh heavily. Among those who do not use AI, 22% cite sustainability concerns over the energy and natural resources required to run AI systems, and a similar proportion (22%) flag data privacy risks. Another 20% worry about algorithmic bias. Most tellingly, 29% of owners admit they are unsure how AI applies to their specific operations, a knowledge gap echoed by broader FSB research which found 46% of small firms say they lack the knowledge to use AI effectively. A separate YouGov survey cited in Whito's 2026 compilation reports that 49% of non-adopters are concerned about data privacy.
The result is not a simple Luddite rejection. Many owners see AI as a values problem, not just a technology problem. In industries like agriculture, transport and hospitality, respondents were among the most likely to say AI was simply not relevant. These are sectors where personal service and physical presence are hard to automate away, and where the perceived effort of implementation may outweigh the benefits.
The Broader Picture: Adoption Statistics Across the UK Economy
Headlines about the UK's AI progress often quote wildly different numbers, and it is worth understanding why. Whito's comprehensive compilation of UK AI adoption statistics (updated 11 August 2026) shows that the official ONS Business Insights and Conditions Survey put the adoption rate at 25% of all registered UK businesses as of December 2025, up from 10% in late 2023. But DSIT's dedicated AI adoption research, based on fieldwork from February to May 2025, found only 16% of businesses with five or more employees using AI. The British Chambers of Commerce, surveying its member base in March 2026, recorded 54%.
These discrepancies are not errors. They reflect different populations and definitions. The ONS figure is the official benchmark for the whole economy, while DSIT's 16% is the deepest small business dataset. The BCC figure skews towards engaged, growth-minded SMEs, just as the Bank of England's Decision Maker Panel figure of 71% skews towards larger employers. As Whito notes, if a statistic claims UK SME adoption above 60%, the sample should be checked before repeating it.
What all the trackers agree on is direction. The ONS series has risen from 10% to 25% in roughly two years, and the BCC member series has more than doubled from 23% in 2023 to 35% in 2025 and 54% by March 2026. Intent is rising too: the ONS found that 15% of businesses were planning to adopt AI within three months in December 2025. The divide is real, but it is narrowing.
Productivity, Revenue and Jobs: What AI Actually Delivers
For those small businesses that do adopt AI, the early evidence is mixed. Productivity gains are widely reported: 75% of adopters told DSIT they saw productivity improvements, and Lloyds put the figure at 87%. Yet only 12% of AI-using businesses report increased revenue so far. This is not a contradiction so much as a timeline. Efficiency and speed come first; top-line growth takes longer to appear.
The impact on jobs has, so far, been minimal. The BCC's March 2026 survey found that 95% of AI-using SMEs reported no impact on workforce size over the past year, while only 4% of adopters told the ONS that AI had reduced headcount. That runs counter to the fear that AI adoption means immediate redundancies. The more common pattern appears to be task shifting: AI handles repetitive back-office work while staff focus on customers, relationships and higher-value activities.
Still, the revenue disconnect is worth noting. If AI is to resolve the UK's broader productivity puzzle, it will eventually need to show up in profits, not just process speed. The record low of 24% of SMEs predicting growth suggests that, for many, AI has not yet become a strategic lever. It remains a tactical one.
Why UK Small Businesses Are Divided Over AI's Role
The Novuna research reveals something deeper than a technology adoption curve: it reveals a philosophical disagreement about the role AI should play. As Jo Morris, Head of Insight at Novuna Business Finance, put it: "In truth, humans and AI need to co-exist, and in the early days of AI roll-out, striking the right balance is key." That balance is easier to describe than to achieve.
Consider the case of Pinky Laing of Remnant Revolution, a small business named in the Novuna release. Her focus remains on craftsmanship and connection rather than pure automation. Her attitude reflects a broader sentiment that many small firms are not rejecting AI itself, but its imagined consequences: losing personal service, removing the human judgement that builds trust, or becoming just another anonymous algorithm-driven operation.
Yet this framing may be a false choice. As commentators on AI growth for small businesses have argued, there is a huge amount of space between operating as before and handing the business over to AI. A company can use AI to speed up market research while keeping a human interpreter. It can automate repetitive back-office tasks while preserving the relationships that surround them. It can qualify leads more efficiently without removing the human decision at the point of sale. The technology should fit the business, not the other way around.
For policymakers, the message is that the AI Taskforce's goals will not be met by presenting AI as an inevitability or a binary choice. The most effective path is likely to be one that reassures small business owners that AI can strengthen the business behind their human relationships rather than replace those relationships. The 31% adoption figure is meaningful progress, but the 48% who remain unconvinced are not obstacles to growth; they are customers of a new kind of AI narrative. Until that narrative shifts, the divide will persist, and the UK's AI-led productivity ambitions will remain only partially fulfilled.
