Small businesses are increasing their use of artificial intelligence, but growing concerns around data protection, intellectual property and legal liability could limit wider adoption, according to new research from the Federation of Small Businesses (FSB).
The study found that 55 percent of small businesses are now using AI tools, up from 20 percent in 2023, highlighting a sharp rise in adoption over the past two years.
Despite the growth, concerns about AI have also increased. More than nine in 10 small businesses surveyed said they have reservations about the technology, up from 73 percent in 2023. The most common concerns include inaccurate results, cybersecurity risks, misuse of intellectual property, lack of transparency in AI training models, potential legal liability, and uncertainty around responsible use.
The findings suggest that companies are seeing tangible benefits from AI. Almost six in 10 users reported an improvement in productivity, while around a quarter said the technology had contributed to higher income. More than one in five said AI had supported business growth. Only a small proportion reported having reduced staff numbers as a result of the adoption.
Tina McKenzie, policy chair at the Federation of Small Businesses, said: “There is a healthy realism among small businesses when it comes to AI, and it’s encouraging to see that many are already finding practical ways to use it to save time, improve productivity and grow. Business owners can see the potential, but they are also asking sensible questions about how their data is used, who is responsible when things go wrong and how they can safely adopt the technology.
“It’s natural that people want to know the rules of the road before taking the leap and starting to use AI. Small businesses want the confidence and certainty to use it well.
“If we can deliver that, the prize is huge. AI has the potential to help small businesses work smarter, reach new customers, develop new products and compete more effectively, generating benefits not only for individual businesses but also for the economy as a whole.”
The FSB estimates that greater and more effective use of AI by small businesses could add more than £42 billion to the UK economy a year. However, the organization said stronger safeguards and clearer regulations are needed to build confidence among business owners.
The business group is urging the government to introduce clearer standards around AI transparency, including consistent disclosure of how suppliers use and store business data. It also calls for stronger protection of business data and intellectual property, clearer rules on liability when AI systems make mistakes, practical support for safe adoption, and tax incentives to encourage investment in AI and other productivity-enhancing technologies.