AI growth gap emerging across UK businesses, as smaller firms risk missing out on AI opportunity
The UK risks developing a significant AI adoption divide, with larger businesses accelerating ahead while many smaller firms remain stuck in the early stages of experimentation, according to new research from NatWest.
The bank’s inaugural AI Adoption Report, based on a survey of 1,400 UK SMEs and mid-market businesses, found that 44% of firms are already using artificial intelligence, while a further 41% expect to adopt the technology within the next five years. Yet only 6% of businesses have reached a stage where AI is fundamentally reshaping operations, decision-making and customer experience.
For many organisations, adoption remains tentative. Nearly a third (29%) of businesses currently using AI are still in the pilot and awareness-building phase, limiting their ability to unlock the technology’s full commercial value.
Size Matters More Than Location
The research suggests that business size, rather than geography, is the strongest predictor of AI adoption.
Companies employing more than 100 people are almost twice as likely to use AI as smaller firms, with adoption rates of 67% compared with 36%. While regional factors account for just 8% of variation in AI uptake, headcount explains 39%, with turnover contributing a further 24%.
According to NatWest, these findings challenge the perception that AI success is concentrated in major technology hubs and point instead to the importance of skills, leadership confidence and access to expertise.
“The opportunity from AI is not confined to the UK’s major technology centres,” said Seb Burnside, Chief Economist at NatWest.
“With size and scale a much stronger predictor of AI adoption, the regional growth story will be shaped less by where a business is based and more by the conditions around it, including access to skills and expertise, the confidence of its leaders and the strength of its local industrial base.”
Returns Increase as Adoption Deepens
The report highlights a striking gap in outcomes between businesses that are merely exploring AI and those that have embedded it deeply into their operations.
Companies in the early stages of adoption typically report time savings of between 1% and 10%. By contrast, businesses classified as being in the “transforming” stage frequently achieve savings of between 61% and 70%.
Revenue gains follow a similar pattern. Almost all businesses in the transforming category (95%) report increased revenue, compared with fewer than three in ten firms still in the earliest stages of adoption.
The findings suggest that competitive advantage may increasingly be determined not by access to AI itself, but by how effectively organisations integrate the technology into their business models.
Trust and Customer Experience Will Define Success
Alongside technology adoption, the report points to customer trust as a crucial factor in determining whether businesses can successfully scale AI initiatives.
Research with more than 2,400 NatWest retail customers found broad support for AI, with 74% saying it makes everyday tasks easier and 67% believing it can improve customer service.
However, consumers were equally clear about the safeguards they expect. More than four in five (81%) identified access to a real person when needed as the most important trust factor. Around three-quarters said they wanted transparency about how AI is used, how their data is handled and the presence of strong independent regulatory oversight.
The findings suggest that businesses combining AI-driven efficiency with human judgement, transparency and accountability are likely to be best positioned to earn customer confidence.
Five Key Barriers Holding Businesses Back
Despite growing interest in AI, many organisations still face significant obstacles to wider deployment.
NatWest identified five key barriers preventing businesses from moving beyond experimentation:
- Skills shortages and a lack of specialist expertise.
- Budget constraints, particularly among smaller firms.
- Uncertainty over which AI tools will generate the greatest value.
- Limited in-house technical capability and organisational readiness.
- Security, governance and regulatory concerns.
Together, these challenges underline that successful AI adoption depends on far more than access to technology alone. Leadership, training, investment and governance are all emerging as critical enablers.
Industry and Government Call for Broader Adoption
Kanishka Narayan, the UK’s AI Minister, said businesses of all sizes must be supported to move beyond experimentation.
“Putting AI to work can help businesses save time, raise productivity and unlock new opportunities for growth,” he said.
“We must make sure firms of every size have the skills and confidence to adopt the technology safely and successfully. Government will play its part, but businesses, banks and technology companies all have a role too.”
NatWest’s Commercial & Institutional Banking CEO, Robert Begbie, echoed the warning, arguing that smaller firms could be left behind without additional support.
“There is a real risk of an AI adoption divide, with smaller businesses facing greater barriers, including limited specialist expertise, skills and investment,” he said.
New Support Measures Announced
In response, NatWest has unveiled a package of initiatives aimed at accelerating responsible AI adoption across UK businesses.
The bank plans to deliver 5,000 AI learning and adoption engagements through its Accelerator programme over the next 12 months, providing entrepreneurs with practical training and access to AI specialists. The Accelerator network currently reaches around 32,000 entrepreneurs across 18 UK locations and is expected to grow to 50,000 members by the end of 2026.
NatWest has also extended its partnership with Google Cloud, giving SMEs access to cloud credits, AI tools, specialist workshops and technical expertise to support innovation and scale-up activity.
Additional initiatives include a new AI adoption pilot programme with Lancaster University, designed to help around 350 mid-sized businesses identify growth opportunities and address implementation challenges, alongside the expansion of NatWest’s Responsible AI Network.
Businesses Already Demonstrating AI’s Potential
The report showcases organisations already using AI to transform operations.
North East engineering firm Transmission Dynamics describes itself as a “transforming” business, applying AI, sensors and advanced engineering to improve infrastructure monitoring and maintenance. Its PANDAS-V system uses train-mounted cameras and AI-powered analytics to identify faults in railway overhead line equipment before failures occur.
According to the company, the technology helped prevent at least six potential dewirements in one Network Rail region over an 18-month period, reduced maintenance backlogs by 18% and generated annual savings of approximately £2.5 million.
Meanwhile, Welsh technology company Academii is combining AI and virtual reality to create personalised, immersive workplace training experiences. Supported through the NatWest Accelerator programme, the business is helping organisations improve learning outcomes while preparing workers for complex operational environments through realistic virtual simulations.
Closing the Gap
The findings paint a picture of an economy approaching a pivotal moment in AI adoption. While enthusiasm for the technology is widespread, the greatest rewards appear concentrated among businesses that have moved beyond experimentation and integrated AI into core business functions.
As adoption accelerates, the challenge for policymakers, technology providers and financial institutions will be ensuring smaller firms have access to the skills, investment and confidence needed to participate fully in the AI-driven economy, rather than being left behind.
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