Closing the AI implementation gap for UK small businesses

Many people believe artificial intelligence has the potential to improve performance for businesses across the UK, with Microsoft recently claiming AI could help boost the nation’s SMEs by £78bn in added economic value over the next decade.

From customer service chatbots to image generation, task automation to analysis of big data, there are opportunities for businesses of all sizes to become more efficient, responsive and productive.

A recent survey of 500 smaller business decision makers, commissioned by Start Up Loans has, however, identified a sizeable gap opening up around AI implementation between the smallest UK businesses and their medium sized competitors, suggesting the smallest businesses could be paying an opportunity cost by not taking up the new technology.

While 60% of medium-sized businesses have integrated AI tools, just 36% of micro-businesses have implemented AI into their business. The concern is that this lack of AI adoption among micro and small businesses may entrench the advantages medium and large sized businesses already have over their smaller rivals.

AI - a nimble tool for growth

Micro businesses could stand to gain significantly from AI because the technology allows business owners to multi-task more effectively. For the 4.1 million businesses that operate without any staff other than the founder, AI tools that help streamline processes by automating routine tasks could enable the business owner - who often now is wearing the hats of accountant, marketer, customer service advisor, chief strategist and many more simultaneously – to become more efficient. The real-world benefit of this is that it allows them to focus on the jobs that will help them not just survive but grow their business.

Overcoming knowledge gaps and financial barriers

But despite this potential, many small businesses lack access to necessary information on how to best implement AI for their business. This knowledge gap extends to understanding what specific AI software may work best for them. Indeed, we see many micro businesses default to using ChatGPT, which may indicate a lack of awareness of less well-marketed AI tools.

This information challenge is compounded by the realities of running a micro business, which requires huge effort day in and day out.

One understandable obstacle to AI adoption among small businesses is a lack of finance to invest in the tools. When considering AI, a quarter (25%) of UK small business owners report a lack of appropriate financial opportunities is stopping them from implementation.

If this was the only barrier then it would be relatively easy to overcome, but finance is just one of a myriad of blockers. For example, 25% cite IT security concerns as a major challenge and 22% report low internet speed. Almost as many believe skills and culture are barriers to greater AI adoption, with more than a fifth (21%) reporting insufficient digital skills as problematic and a similar percentage (19%) reporting internal resistance to change as a hindrance.

These challenges, essentially boil down to two main categories: finance and knowledge.

To address the first category, Start Up Loans is well positioned to support start up business owners with investments in technology, including artificial intelligence, through offering a fixed, competitive rate of interest on loans of up to £25,000.

To help with the second, as part of our post-loan support we offer access to mentors who can pass on their knowledge and experience. We also provide a range of guides so that business owners can understand better the benefits of AI and some of the tools available to them.

Magic AI – a small AI business success story

Varun Bhanot, founder of Magic AI, an AI-enabled mirror that delivers personalised workout sessions and can even correct a person’s form when exercising by analysing what it observes, set up his business with a Start Up Loan. With the help of £25,000 secured via Start Up Loans’ Business Support Partner, Virgin StartUp, Varun was able to bring his product to life.

Varun also uses entry-level AI platforms to help manage the day-to-day running of his business. It is these platforms that can provide useful support to small business owners who may be running their operations independently. AI chatbots, for example, are a nimble way for business owners to respond to customers in a timely manner, allowing founders to focus on ideas and expansion.

Magic AI is far from the only artificial intelligence company that has been supported by Start Up Loans financing and post loan support. Anglesey-based Ecodetect has been named North Wales Start Up of the Year at the Wales Start Up Awards, exactly a year since beginning trading and shortly after securing a £25,000 Start Up Loan. The company provides marine life detection services which help offshore renewable energy developers monitor marine infrastructure projects to ensure projects co-exist safely with local biodiversity and uses AI to provide more accurate data for underwater analysis required by marine regulators.

And while we support these tech-first businesses, we also have many examples of Start Up Loans-supported businesses using AI in a diverse range of situations, from having ChatGPT help them write their initial business plan through to using it to create marketing assets for Facebook advertising and everything in between. It’s this broad range of use cases that showcases how AI can complement humans and potentially be beneficial for small business owners.

AI complements human work

Implementing AI into small business operations doesn’t mean that human capabilities are replaced. AI capabilities rather enhance efficiencies, so business owners have more time to focus on their strengths, exercise their creativity, or to build relationships with their customer base.

Having access to trial AI software is important, as it can demonstrate capabilities first-hand to small business owners. They can see how much productivity can potentially increase or how tasks can be made to be more manageable, while being able at the same time to rule out certain AI tools that may not be as useful to them.

Helping businesses move into an AI-enhanced future

Having an openness to technology and taking advantage of financial support that is available, small businesses in the UK can overcome barriers to AI adoption and close the gap to their more well-established competitors, whom we know are more likely to use AI in their business.

If Microsoft are right about the potential economic value of implementing AI, we can make a real difference to micro businesses, and the wider economy, by helping them to understand and implement the technology in the same way as their larger counterparts. We look forward to helping them do so.