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Pace of AI adoption means Government and education system have to catch-up fast, say small firms

5 March 2024

Small firms need protection from deepfakes and improvements to the education system to allow Artificial Intelligence (AI) to live up to its true potential, a new report by the Federation of Small Businesses (FSB) shows.

Redefining Intelligence: The Growth of AI Among Small Firms, published today, emphasises that while the technology can work in tandem with human intelligence and creativity, it should not replace human judgement entirely.

It also highlights the importance of Intellectual Property (IP) rights, over fears that allowing AI to sidestep IP could disincentivise small firms from coming up with new, creative ideas.

Figures show that small firms are adopting AI at a rapid pace, with one in five (20%) already using it, and 11 in 20 (55%) recognising its potential benefits. Similarly, three in five (60%) aiming for rapid growth plan to use it – but these figures are likely to grow rapidly as the technology gets smarter.

But while AI will bring many benefits, the risks must not be glossed over as the AI debate gains more traction, with the 73 per cent yet to embrace it worried about:

  • 46% not having the knowledge to use it correctly.
  • 31% their ability to manage security risks.
  • 24% the impact of deepfakes.
  • 20% the abuse of their IP rights.
  • 12% whether it will reduce the long-term viability of their business.

The fear of being left behind is most prominent in the information and communication sectors, with 25 per cent of small businesses in this sector concerned that it could undermine their viability.

Despite this, small firms, who are nimbler by nature and tend to harness new technologies quicker than their larger rivals – do have plans to grow their business using AI.

Indeed, 16 per cent plan to enrol on an AI course, 8 per cent will invest in training for their staff, 13 per cent want to use it to improve customer experience and 13 per cent want to explore how they can initiate new business models with it.

Elsewhere, over a quarter (26%) do not believe AI is appropriate for their business – including over half (51%) in the construction sector and 45% in hospitality.

However, as AI’s capabilities evolve, there needs to be a solid regulatory framework in place to help small firms use it to their advantage. Redefining Intelligence recommends the Government:

  • Make it illegal to use deepfakes with the intent to cause commercial damage, with legal recourse available for victims.
  • Request the Law Commission conduct a review into the use of AI and how it relates to IP, and how best to update existing laws to make it clear that copyright can only sit with a human author.
  • Broaden the remit of Ofcom so it regulates cloud infrastructure in the same way as utility providers, ensuring cloud infrastructure remains affordable.

On skills, FSB recommends:

  • Creating a GCSE and A-Level qualification in applied computing, that focuses on the practical use of AI.
  • Specific new programmes to help make small business owners make the best possible use of AI in their business, including to better assess training and to make sure take-up of new technology is supported.   

Federation of Small Businesses (FSB) national policy chair Tina Mckenzie, said:

“There is a genuine buzz of concern that AI must be properly regulated. It’s important to recognise that despite its leaps and bounds, the technology remains firmly in the shadow of the human mind’s creativity and critical thinking. It might excel at recognising patterns at speeds that dwarf human capabilities, but it falls short on nuance, ethics, and empathy – qualities only humans can bring to the table. AI is great for supplementing human intelligence and creativity but will never replace it.

“That is why it is more important than ever to prove that it can be an ally instead of a foe by investing in upskilling programmes, banning deepfakes and crafting sensible regulations that ensure small businesses intellectual property is not misused.

“Small firms are agile and can make quick changes to their operations, and with the right framework, will be able to embrace AI at pace. It would be a big shame to leave them behind as AI grows in capabilities.”

Leics, Northants and Rutland Development Manager Jennifer Thomas added: “In our local area we are hearing more and more small businesses talking about AI- some are finding it is helping them to overcome challenges like lack of staff or capacity, and others find it helps with their marketing and social media. Many however are skeptical, or find it interesting but can’t see a practical use in their business.

“Wide adoption and practical application will be essential to help SMEs make best use of the technology, and potentially use it to compete with larger businesses with greater following and resources. We believe that locally where AI is discussed and showcased, it must be in a practical, accessible way if SMEs are to benefit, and any business support programmes offering digital diagnostic and adoption advice should include an element of how SMEs can make use of AI in a quick, safe and productive way.”


Notes to Editors

1) FSB surveyed 816 small businesses in the UK from 14 – 28 September 2023.
2) Full report is available to download here:
3) Case studies are available on request.