SMEs account for 99% of UK businesses, so if we’re serious about using AI to power up our economy, they need to be embracing it with the same fervour seen by larger enterprises.

And yet, according to BT research, one in five small firms still see themselves as “analogue first”, with further research listing AI as one of their top concerns.

There is clearly huge growth potential in the sector. A digital-first approach is important for these businesses to thrive, but big businesses must lay the foundations for success through knowledge sharing, training and, at least in BT’s case, connectivity.

There is trepidation around the technology, however, with smaller companies less likely to take the plunge. A recent study from Be the Business showed that while a third (36%) of SMEs use AI from time to time, half haven’t used it for their business at all, and two in five (42%) have no current plans to introduce or expand AI tools in the future.

There are many reasons why smaller companies are reluctant to fully engage with AI – and most are far more rooted in concerns around collaboration and engagement.

At BT’s and Be The Business Productivity Collective Community event last month, we heard a diverse group of SME leaders raise concerns that AI adoption would lead to a “brain drain” of their workforce. There was anxiety around staff becoming so reliant on advanced tools they would be impacted by outages like those we’ve seen at OpenAI and DeepSeek recently.

Another commonly cited fear was that the regular use of AI could create reputational risks for their business, particularly if relied upon to create written content around sensitive or social issues.

Being unable to train employees sufficiently or hire the right talent to use AI effectively was also a concern. Unlike larger corporations with dedicated resources for AI education and recruitment, SMEs may lack the budget and time to kickstart these operations confidently.

In a similar way, choosing and implementing the appropriate AI solution for their business’s specific needs can be overwhelming. Indeed, seamless integration with existing systems and ways of working can deter them from adopting AI altogether.

Considerations around GDPR and protecting their customer’s data was also noted as a barrier to AI adoption. AI requires a vast amount of data and the implications of using this on a large scale, when there are hefty fines for breaches or misuse can be daunting.

SMEs are the engine room of our economy. They bring agility, innovation, and a nuanced understanding of their markets to the table. Their ability to adapt quickly and think outside the box gives them a competitive edge, but when it comes to AI, many need support in cutting through the hype to uncover practical applications that drive real value.

Digital skill initiatives are crucial in fostering AI literacy, ensuring employees can leverage artificial intelligence as an important productivity tool. At BT, we recognise that providing free digital skills programmes goes a long way in upskilling workforces, and have already provided this to 1.2 million small businesses to date.

Crucially, larger businesses have a role to play in breaking down barriers to AI adoption for SMEs – whether through mentorship, training, or collaboration. Companies further along in the adoption of AI must also make themselves heard, sharing advice and guidance from learned experience. This is key to giving SMEs the confidence to roll out AI, using it to improve customer service, empower their workforce and increase productivity. Building business communities, like the ones we foster through our Netwalks initiative with Small Business Britain, are important in bringing leaders together for this exact purpose.

By bridging the gap between cutting-edge AI innovation and the real-world challenges SMEs face, we ensure that technology serves as an enabler rather than an obstacle. The stakes are high, not just for businesses, but for the millions of people they employ and the customers and communities they serve. AI has the power to streamline operations, enhance creativity, and unlock new opportunities, but only if small businesses have the support, resources, and confidence to embrace it.

Conversations around AI must not just be about the future of technology, it must be about the people and businesses that will shape that future. If we get this right, AI won’t just be a tool for large enterprises or those with big budgets; it will be a force for inclusive economic growth, innovation, and opportunity for all.

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