That’s according to new research published today by Start Up Loans, conducted by YouGov, which reveals a third (34%) of small business leaders only have a ‘basic understanding’ of AI tools and less than half (46%) of small businesses use AI at work.
Interesting (and probably not surprisingly) the research suggests a gap is already emerging between mid-sized business and smaller businesses:
- Whilst 60% of medium-sized enterprises are using AI tools, this figure drops to 36% for micro businesses
- Medium sized businesses are more than twice as likely to be investing in access to AI tools, as only 23% of micro businesses pay for AI
- IT security, financing and low internet speeds are the top three barriers to AI adoption
On average, only 12% of small business leaders would refer to themselves as an ‘expert’ in the technology, when thinking about their proficiency in five core pillars of AI: Generative AI, chatbots and virtual assistants, speech to text and vice versa, text analysis and summary, and AI-powered text editing.
What are the biggest barriers to AI Adoption?
The biggest barriers to further AI adoption were found to be:
- IT security issues (25%)
- A lack of appropriate financing possibilities (25%)
- A low speed of internet connection (22%)
There is also a knowledge barrier preventing many small businesses from reaping the full benefits of tech and AI in the workplace.
21% of business leaders cite insufficient digital skills of employees as being problematic, while a similar percentage (19%) cite an internal resistance to change as a hindrance. These barriers and lack of understanding are leading to a delay in uptake of the technology, which can be transformational when adopted in the right way.
AI adoption rates differ depending on business size
Within smaller businesses there was a clear divide between those at the larger end of the spectrum and those at the more micro end when it comes to using AI.
The survey found that AI is used in:
- 36% of micro businesses (0-9 employees)
- 44% of small businesses (10-49 employees)
- and rises to 60% of medium-sized enterprises (50-249 employees)
How one South West entrepreneur is leveraging AI to create and scale a start-up business
One South West small business owner who is bucking the trend when it comes to the uptake of AI tools is serial entrepreneur Rob Law MBE. Famously rejected in Dragon’s Den in 2006 for his ride-on Trunki suitcase, Rob went on to create a global travel brand.
Today Rob is focused on shaping the future of business, particularly in the realm of AI. Among his latest ventures is Start Up Loans-backed Zeepy Ltd, a brand co-created with AI to enhance natural sleep in infants and young children, marrying media with physical devices.
Bristol-based Rob said:
“AI is like having a superpower that levels the playing field for small businesses. It doesn’t replace people – it amplifies small teams. AI lets you look, feel, and perform like a much larger business, which is a huge advantage for start-ups. It gives us the freedom to take more risks and try new ideas at very little cost.
“AI has been genuinely transformative. We launched a podcast from scratch, with zero prior experience, that’s now had over 10,000 downloads and sits in the top 5% globally. We created a strong, professional brand using AI which saved us years of work and tens of thousands of pounds.
“Our podcast is now available in multiple languages, which helps us reach international audiences. Content creation that once took weeks now takes hours. We’re getting great feedback from parents who love the care and thoughtfulness in our content, all supported by AI.”
Rob said that AI had also helped automate technical and repetitive tasks, creating time to think more creatively, test ideas quickly and explore new partnerships.
He added:
“AI is essential for the future of small businesses. It’s like having a 24/7 team of experts at your side. I believe the future role of a CEO will be managing a team of AI agents, overseeing their work and reviewing outputs. Small businesses that embrace AI will move faster, save costs, and outpace competitors.”
Rob’s comments reinforce a key message: when used responsibly, AI can unlock significant benefits – from faster content creation to smarter decision-making.
At South West AI Solutions, we regularly see how this technology, when properly introduced, can drive real business gains. But we also understand why many leaders feel hesitant. The jargon, the pace of change, and the sheer number of tools can be overwhelming.
Jo MacEachen, Start Up Loans Senior Manager for SWIG Finance, which is the Business Support Partner for the Start Up Loans programme in the South West, added:
“We’re seeing more and more small business owners investing in technology like AI. By leveraging its capabilities to scale and strengthen operations, smaller businesses can now compete with larger, more established businesses.”
Jo continued, “And it’s not just about automating repetitive tasks, it’s a powerful tool for data-driven decision-making, from sales forecasting and inventory management to identifying emerging market trends and data analysis. AI enables businesses to operate more strategically and more efficiently with fewer resources.”
Louise McCoy, Managing Director, Start Up Loans Products, British Business Bank said: “AI has the potential to transform the way smaller businesses operate, but many people running those businesses face a plethora of barriers which need to be overcome if they are to benefit from the technology. We hope our information, as well as start-up financing, one of the biggest hurdles identified, can help drive more use of AI.”
“By adopting AI responsibly, smaller businesses could unlock new opportunities for growth and innovation, ensuring they remain the driving force of the UK economy”.
Start Up Loans offers pre- and post-loan support packages, including access to Learn with Start Up Loans, a partnership with the Open University, with courses covering key aspects of running a business.
The Start Up Loans programme was established in 2012 to help people – wherever they are in the UK and whatever their background – to achieve their ambitions of starting their own business. It provides fixed-interest loans of between £500 and £25,000 to aspiring business owners, many of whom might otherwise struggle to secure finance.
For free advice on how to use AI to grow a business, please visit: Free AI tools to help grow your business.
Curious about AI but not sure where to start? You’re not alone
For many business leaders, the idea of implementing AI across their organisation can feel overwhelming. South West AI Solutions was created to change that.
We work with senior leaders, business owners, and department heads who are ready to take their first (or next) steps with AI. Whether you’re completely new to AI or looking to scale what you’ve already started, we offer practical, hands-on support to help you turn potential into progress.
From live demonstrations and in-house consultancy to tailored training and step-by-step guidance, we help to make AI simple, accessible, and relevant to your business.
To find out more, book a FREE 1 hour AI Introducer Session with us, and let’s make AI work for you and your business.
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