UK SMEs risk falling behind in AI race, NatWest warns

Smaller UK businesses risk being left behind as larger companies move more quickly to embed artificial intelligence across their operations, new NatWest research suggests.

The study of 1,400 UK SMEs and mid-market businesses found 44% are already using AI, with another 41% expecting to adopt it within the next five years.

Yet only 6% of current users have reached the most advanced stage of adoption where AI is transforming operations, decision-making and customer experience.

Size, not location, drives UK AI adoption gap

According to the report, size appears to matter considerably more than location. AI is being used by 67% of businesses with more than 100 employees, compared with 36% of smaller firms.

NatWest’s analysis found headcount accounted for 39% of the variation in AI adoption, compared with just 8% for geography.

The potential gains also increase sharply as businesses make greater use of the technology. Companies at the earliest stage typically report saving between 1% and 10% of working time. At the most advanced stage, reported average savings rise to between 61% and 70%.

Some 95% of businesses in the most advanced group also reported increased revenue, compared with fewer than 29% of those at the earliest stage.

Skills and investment remain key barriers

For smaller businesses, NatWest identifies cost and skills among the main obstacles.

Its research highlights five barriers to wider adoption: skills gaps, cost pressures, uncertainty over which tools to use, limited in-house expertise and readiness, and concerns around security and governance.

The findings suggest many smaller firms could risk missing out on AI’s potential because they lack the specialist knowledge and resources that larger organisations have.

Smaller firms are also often constrained by budgets and rely on free or low-cost AI tools, the research found, while larger organisations are more likely to have dedicated investment.

Robert Begbie, CEO, Commercial & Institutional Banking at NatWest, said: “There is a real risk of an AI adoption divide, with smaller businesses facing greater barriers, including limited specialist expertise, skills and investment.”

NatWest says it is creating a package of support, including 5,000 AI learning and adoption engagements through its Accelerator community over the next 12 months.

It is also extending its partnership with Google Cloud, giving SMEs access to Google Cloud credits alongside AI tools and training, and launching a University of Lancashire pilot aimed at around 350 mid-sized businesses.

The initiatives are aimed to help SMEs overcome the skills, confidence and investment barriers that slow AI adoption across the UK.