A lack of trust around data, copyright and legal liability is holding back wider AI adoption among small businesses, despite new research suggesting the technology could add more than £42 billion a year to the UK economy.
The Federation of Small Businesses said AI use among small firms has nearly tripled in two years, with 55% now using the technology compared with 20% in 2023.
But concern about the risks has also risen sharply. FSB research found that 92% of small business owners are now worried about AI risks, up from 73% in 2023.
The biggest concerns include inaccurate responses, security, misuse of intellectual property, lack of transparency around how AI models are trained, legal liability and uncertainty over using AI responsibly.
Despite those concerns, the research suggests many small firms are already seeing benefits. Some 59% reported productivity gains, 24% said AI had increased revenue and 22% said it had helped them grow their business. Only 8% said the technology had helped reduce staff levels.
FSB said small businesses adopting AI reported an average 3% increase in revenue. It estimates that wider and deeper use of AI could add more than £42 billion to the UK economy each year.
The business group is calling on government to introduce clearer rules on AI, including standardised “model cards” setting out how business data is used, where it is stored, whether it is used to train models and who is responsible when things go wrong.
It also wants stronger protection for small firms’ data and intellectual property, clearer liability rules, practical support from the Department for Science, Innovation and Technology and tax incentives to help businesses invest in AI and other productivity-enhancing technologies.
Tina McKenzie, policy chair of 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 so many 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 adopt the technology safely.
“It’s only natural that people want to know the rules of the road before they take the leap and begin using AI. Small firms are looking for the confidence and certainty to use it well.
“If we can provide that, the prize is enormous. AI has the potential to help small businesses work smarter, reach new customers, develop new products and compete more effectively, unlocking benefits not just for individual firms but for the wider economy too.”
The figures form part of forthcoming FSB research into AI and technology. The organisation surveyed 904 small business owners between 11 and 24 November 2025.
