Small businesses could boost the UK economy by as much as £78 billion, drive high-wage job creation, and improve their competitive edge simply by adopting AI technology, according to a new report from Microsoft.

While the majority of large businesses have already embraced AI to at least some extent, the latest figures show just 37% of British SMEs are leveraging the power of AI, despite accounting for more than 99% of the country’s business population.

That slow uptake of AI among SMEs often comes down to things like the high costs of implementation, a low awareness of AI’s benefits, and a lack of digital skills or in-house expertise.

That’s not to mention the pressing need to deal with more immediate priorities, like staying on top of cybersecurity.

However, Microsoft’s study, Unlocking Regional Growth: The Impact of AI Adoption by SMEs, argues that by adopting more genAI tools for tasks like document drafting and book-keeping, SMEs could supercharge their growth and add billions to the economy over the next decade.

Far from being left behind as enterprise firms steamroll ahead with their AI plans, Microsoft’s research shows that the agility of SMEs means they are well-placed to rapidly benefit from emerging tech, as long as they have the right support. 

Regional analysis found that genAI adoption among SMEs could see West Yorkshire gain a £4.6 billion uplift in economic value, while Liverpool City Region could benefit by as much as £2.8 billion, and Cardiff by as much as £2.4 billion in additional economic output.

“This research shows just how important AI adoption is to the future of our region,” said Tracy Brabin, mayor of West Yorkshire.

“Our region is home to thriving clusters of creative, digital, and high-tech businesses – but too many still face barriers to adopting the tools they need to stay competitive.

Tackling those barriers has been a key part of the UK Government’s economic plan since coming into power last year. Coming fast on the heels of the AI Action Plan, Labour put £7 million behind helping UK SMEs adopt more AI tools, resulting in the vast majority of small businesses feeling under pressure to take up the tech.

Those plans have stalled across the country, however, with SMEs challenged by a lack of infrastructure and financial support. In Liverpool, for example, researchers found that a tenth of businesses don’t have access to the basic internet connectivity required to work with AI.

To overcome these barriers, Microsoft laid out a roadmap for national and local leaders, with the ultimate goal being to ensure every SME in the UK can fully adopt genAI within the next ten years. 

The tech giant wants to see regional ‘AI champions’ set up to help put AI front and centre in Local Growth Plans, giving mayors and local leaders a clearer, more coordinated wayof to boost digital adoption, especially around genAI.

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The report also suggests the launch of regional genAI ‘adoption challenges’, offering hands-on advice, training, and planning support for local SMEs. On top of that, they’re calling for more government incentives to help small businesses get on board with AI.

Similar plans are already underway in Scotland, where CodeBase has partnered with Aberdeen City Council and Scottish Borders Council to offer an AI programme for local SMEs.

“The £78 billion opportunity isn’t just a number – it’s growth that should be felt in communities from Kent to Cumbria,” said Hugh Milward, vice president for Microsoft UK.

“To unlock it, we need coordinated 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.”

“Small businesses are the backbone of the UK economy, but without targeted support, the country’s ambition for growth will falter.”