Wider AI adoption could add £43Bn to small business revenues, new modelling finds
New Social Market Foundation analysis estimates gains of £38-47 billion across small and medium-sized businesses in Great Britain through wider AI adoption, with the Midlands and the East of England gaining most relative to the size of their economies.
The SMF’s report, sponsored by Intuit, combined a survey of 1,015 small and medium-sized business leaders with official data on local economies, including ONS figures on output, earnings, qualifications, and business numbers. The SMEs already using AI among those surveyed report an average revenue uplift of around 2.8%.
The SMF suggests that a further 18% of SMEs will adopt AI, in line with the share that report plans to do so. While surveyed SMEs report an average revenue uplift of around 2.8%, later adopters are expected to see a smaller gain of around 2.3%.
The central estimate of revenue gains is around £42.6bn, assuming that firms intending to adopt AI go on to do so. The estimate rises to £47.3 billion if AI adoption exceeds current expectations, but falls to £38.1 billion if fewer firms adopt AI than currently intend to.
London, which is home to more SMEs than any other region, stands to gain most at around £10 billion in SMF’s central scenario, followed by the South East (£6.3 billion) and the East of England and North West (£4.3 billion each). However, the East Midlands (0.72%), East of England, and West Midlands (0.67% each) can gain the most, as SMEs make up a larger part of their economies.
Time savings (88%) and quality improvements (79%) are the most widely reported benefits for those surveyed, independent of business characteristics.
Revenue uplift depended on what AI was being used and how deeply. Advanced AI users report significantly better impacts than basic users. Similarly, specialist tools also show a slightly stronger and more consistent association with positive outcomes than general LLM chatbots.
Surveyed senior business leaders were 1.8 times more likely to report an increase in company headcount. However, most of the AI-using businesses (63%) report no change in either direction.
Barriers remain for small businesses to take up more specialised and beneficial AI tools, including concerns such as data security (33%), quality or reliability (31%), and skills (26%). Overall, concerns spread thinly across many issues, perhaps reflecting the diversity of the SME population, where different businesses face different obstacles.
Noting these barriers and that financial incentives alone won’t be enough to drive wider adoption, the SMF calls on government to:
- Launch a national awareness campaign with trade associations, industry champions, universities, and local authorities, after previous support schemes suffered poor take-up
- Introduce a tiered “Help to Grow: AI” scheme, combining financial support with ongoing one-to-one advice and a “CTO-as-a-service” platform to help firms assess their AI maturity
- Develop an assurance ecosystem for AI products aimed at SMEs, including standardised model cards (digestible, plain-language overview of capabilities, and fairness and internal governance considerations), a government-backed repository of pre-approved AI systems and modular template contract clauses
- Strengthen AI-ready data foundations, setting technical standards for data quality and interoperability in B2B software and creating securely pooled, industry-relevant data trusts
- Monitor employment effects, with the AI Economics Institute tracking SME jobs so that support incentivises augmenting rather than automating labour.
Jake Shepherd, Senior Researcher at Social Market Foundation, said: “Our research finds that the potential economic returns are considerable, with greater adoption estimated to increase revenue by up to £47 billion across Great Britain. The challenge for SMEs is not simply encouraging adoption, but also enabling them to move beyond experimentation towards more extensive integration. A good policy package, beyond just financial incentives, can help achieve this.”
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