Field Notes

What the UK is doing ( and not doing) for SME A.I. Adoption

22 Sept 2025•David Ashenden

Photo by krakenimages on Unsplash

In my UK-US tech deal piece I argued that ambition is cheap and execution is the real test. The same rule applies at home.

We have strategies, communiqués, and photo opportunities. What the average small firm has is a thin margin, a tired tech stack, and no time to experiment. If the UK wants a real AI economy, SMEs must move from spectators to participants.

Right now adoption is uneven. The Office for National Statistics put AI use at about 9 per cent of firms in 2023, with roughly 22 per cent telling pollsters they planned to adopt in 2024. That is progress, but it still leaves the majority untouched. Across the OECD the pattern is similar. Small firms lag large ones by a long way. We do not have a British problem so much as a structural one. We also do not have the luxury of waiting for it to fix itself.

The UK has built a patchwork of supports and to be fair, Britain is not doing nothing. There are real programmes.

BridgeAI from Innovate UK puts money into feasibility projects, connects firms with AI experts, and publishes frameworks that explain how to get started. It focuses on sectors like agriculture, construction, transport, and creative industries.
Made Smarter supports manufacturing SMEs with grants, advisers, leadership training, and student placements. In its North West pilot it funded over 300 projects and generated hundreds of millions in expected productivity gains.
The Digital Catapult runs testbeds and accelerator programmes.
Universities push Knowledge Transfer Partnerships to embed researchers inside firms.
Regulators have created sandboxes to test AI in fintech and health.
Growth Hubs and LEPs still provide generic business support, sometimes pointing SMEs toward AI vendors.

None of this is trivial. But it is not joined up. An SME owner in Leeds or Belfast would struggle to know where to start. The energy is there. The outcomes are not yet at scale. That is the core British problem.

We are world class at pilots and announcements. We are average at follow through.

You can see the difference in finance, where adoption is now infrastructure, and in healthcare, where pilots remain pilots.

The SME Digital Adoption Taskforce diagnosed that gap and called for a single front door. A real CTO as a service. Clear case studies. Modest financial nudges. Someone in government with the job title and the teeth to make it happen. It is the difference between a brochure and a plan.

"The UK must become the most digitally capable and AI confident SME sector in the G7 by 2035." - SME Digital Adoption Taskforce

So what would it look like if the UK stitched this together.

First a single front door. Not another splash page. A real triage service that asks a small firm what sector it is in, what systems it uses, what it can spend, and then tells it in plain English what is possible. The taskforce calls this a CTO as a service. It should be built like consumer software. Opinionated defaults. Clear guidance. No jargon. If the advice looks like a government PDF it will fail.

Second a credible marketplace. Pre vetted, sector specific solutions that are priced for SMEs and integrate with the systems SMEs already use. Singapore’s SMEs Go Digital did this work and then paid for half the bill. The UK does not need to copy the subsidy levels, but it does need to copy the simplicity. If you make adoption feel like a procurement exercise, smaller firms will opt out.

Third a small but reliable financial nudge. Not a blank cheque. A modest tax credit or voucher that offsets integration costs. For most small firms the pain is not the subscription. It is the weeks spent changing processes and retraining people. A £2,000 to £5,000 nudge can convert good intentions into live deployments.

Fourth local delivery partners. Germany’s Mittelstand Digital centres succeed where there are humans in the loop. Advisors who show up in person. Trainers who understand a factory that runs on tacit knowledge and Excel. The UK has Growth Hubs, universities, and chambers of commerce. Put the programme through the institutions that SMEs already trust.

Fifth procurement that rewards adoption. If the public sector wants AI to diffuse, it should buy from firms that use it well. Score tenders for measurable process improvement using AI. Make the prize visible. You do not need a lecture about productivity if the buyer is quietly paying for it.

International comparisons help to set expectations.

The US model is market led. Cloud tools are everywhere. The result is fast diffusion where firms are already digital, and slow diffusion where they are not. Germany has a structured network for its Mittelstand. It moves the middle, but not quickly. Singapore is small and decisive. It chooses the tools, pre approves the vendors, co funds, and gets on with it. The UK sits in between. It will need a hybrid model that respects scale and regional differences while keeping the path simple.

International SME AI strategies compared

Now to the hard bit. Why SMEs do not adopt.

It is not because they are luddites. They are pragmatic. They live by cash flow. AI is only as good as the data you feed it. Many small firms do not have clean data. AI needs standardised processes. Many small firms are built on tacit knowledge and improvisation. AI needs upfront integration. Many small firms run on thin margins and short pay cycles. If you do not change those facts, you will not change adoption.

Garbage in, garbage out is not a cliché. It is day one of SME AI.

The policy translation is simple. Fund data cleaning, not just software pilots. Pay to map processes and document tacit knowledge, not just to buy licences. Tie grants to visible operational change, not to the number of workshops attended. And stop writing for Whitehall. Write for a three person firm that has QuickBooks, a warehouse, and a boss who spends Sunday doing payroll.

What about trust. SMEs worry about data protection and liability. A generic ethics framework will not help them. They want a one page rule for their sector. If you sell online, here is what good looks like. If you are a clinic, here is how to protect patient data. If you are a solicitor, here is how to supervise generative drafting. Sector rules beat sermons.

Last, the capital ladder. Some SMEs will find that AI lets them punch above their weight. Those firms need growth capital that does not force a move to California. The UK has started to unlock pension funds for growth equity. It should keep going. Without later stage capital, British firms invent engines and foreign firms build the cars.

The takeaway is not complicated. Britain does not need another narrative. It needs plumbing. A single front door that gives usable advice. A marketplace that does not waste time. A modest nudge to cover integration. Local humans who can help. Rules that make sense in a real business. Growth capital that keeps winners British.

Do that, and the adoption numbers move. Do not do it, and we will be back here in two years talking about pilots.

The measure of success is not how many datacentres we build. It is whether the average SME feels more capable, more productive, and more competitive ten years from now.

What are you thoughts? Let me know in the comments

References / Further reading

UK Government – AI Opportunities Action Plan https://www.gov.uk/government/publications/ai-opportunities-action-plan

UK Government – SME Digital Adoption Taskforce Final Report https://www.gov.uk/government/publications/sme-digital-adoption-taskforce-final-report

Innovate UK – BridgeAI Programme https://iuk-business-connect.org.uk/programme/bridgeai/

ONS – Business Insights and AI adoption statistics https://www.ons.gov.uk/economy/economicoutputandproductivity/productivitymeasures/articles/managementpracticesandtheadoptionoftechnologyandartificialintelligenceinukfirms2023/2025-03-24

BMWK Germany – Mittelstand-Digital Programme https://www.mittelstand-digital.de

IMDA Singapore – SMEs Go Digital https://www.imda.gov.sg/smesgodigital

McKinsey – The economic impact of AI on the UK economy https://www.mckinsey.com/~/media/McKinsey/Featured%20Insights/Artificial%20Intelligence/Artificial%20intelligence%20in%20the%20United%20Kingdom%20Prospects%20and%20challenges/Artificial-intelligence-in-the-United-Kingdom-VF2.ashx

Made Smarter UK – Impact Report https://www.madesmarter.uk/media/gl4jkqoi/evaluation-of-made-smarter-innovation-programme-final-may-2025.pdf

US Chamber of Commerce – AI and Small Business https://www.uschamber.com/technology/empowering-small-business-the-impact-of-technology-on-u-s-small-business

PwC UK – The macroeconomic impact of AI https://www.pwc.co.uk/economic-services/assets/ai-uk-report-v2.pdf

OECD – ICT Access and Use by Businesses Database https://stats.oecd.org/Index.aspx?DataSetCode=ICTBUS