UK small businesses falling behind on AI, Google warns
New research from Google has revealed a bottleneck in UK small business innovation. Over half, or 59 per cent, of SME owners say they have had to put ‘game changing’ ideas on hold over the past year, citing a lack of time to bring their concepts to life.
For many, these stalled ideas are more than just ambitions, with almost two-thirds of SME leaders saying that, if realised, their innovations could increase revenues by up to 30 per cent.
Google estimates that AI-powered tools could unlock a £198bn productivity and growth boost across the UK SME sector.
“Over half of SMEs have had to pause innovation”, said Debbie Weinstein, Google EMEA President. “It’s a wake-up call, but also an opportunity. AI can free up time for leaders to focus on strategic, innovative tasks that spur growth for both their businesses and the wider economy”.
Productivity boost
According to analysis from Public First, AI-powered platforms like Google Workspace with Gemini could boost SME productivity by 20 per cent – equivalent to adding an extra working day each week.
For UK SME leaders, who average nearly six days of work (49 hours), that is a tangible opportunity to finally act on their ideas.
Business secretary Peter Kyle welcomed Google’s initiative. “AI is transforming the way we work”, he said. “This partnership gives small businesses hands-on experience to capitalise on the benefits of AI to innovate, grow, and compete on the global stage”.
Google has partnered with the Department for Business and Trade and NatWest for its nationwide ‘AI works for business” tour, stopping in Manchester, Leeds, Edinburgh, and Cardiff.
The events are designed to teach SMEs how to apply AI to boost efficiency, reduce routine workload, and free up time for growth-oriented projects.
AI scepticism remains
The report also highlights that, while 86 per cent of UK SMEs say they are familiar with AI, adoption remains far from universal.
Only 31 per cent currently use AI-powered tools, with a further 15 per cent planning to do so.
Sectors such as IT and telecoms lead the charge, while manufacturing, retail, and hospitality lag behind.
“The AI story is real, but it’s still early days”, said Hugh Milward, vice president at Microsoft UK. “There’s enormous potential, but small businesses need both skills and confidence to apply these tools effectively”.
Among SMEs already experimenting with AI, automation and marketing dominate use cases, while only 19 per cent employ AI for real decision-making.
Concerns around data privacy, employee creativity, and ethical issues remain a barrier for many companies.
The wider picture
Google’s findings echo broader European trends.
A Qonto study across France, Germany, Italy, and Spain found that while 46 per cent of SMEs use AI tools, many still lag in fundamental digital infrastructure.
Indeed, only 24 use digital accounting, while just 22 per cent rely on video-conferencing platforms.
Alexandre Prot, CEO of Qonto, warns: “European SMEs are chasing flashy AI tools while neglecting core digital foundations. Without a solid infrastructure, even the most promising AI innovations risk falling short.”
The UK, like its European peers, faces a critical juncture. As AI slowly seeps into small business workflows, the challenge is not just adoption but smart adoption: using AI to solve real problems, drive productivity, and unlock growth – without overlooking the basics.