AI Drives Productivity Gains for UK Small Businesses

Groundbreaking research from the University of St Andrews reveals that adopting Artificial Intelligence can significantly boost productivity within small and medium enterprises (SMEs), with gains ranging from 27% to a striking 133%. The study, led by Professor Ross Brown of the St Andrews Business School, compared productivity levels in UK SMEs that implement Artificial Intelligence solutions versus those that do not, drawing data from the nation’s largest survey of small businesses—the longitudinal Small Business Survey (LSBS). Nearly 10,000 firms participated, providing a comprehensive and representative sample across various sectors and regions.

The findings indicate that firms in sectors with traditionally lower productivity, such as catering and hospitality, are among the most likely to adopt Artificial Intelligence technologies and derive notable benefits. These technologies often provide rapid, cost-effective improvements in day-to-day operations; for instance, streamlining staff scheduling and reducing food waste for restaurants. Service-focused SMEs in particular stand out for leveraging these digital tools to secure quick productivity wins without large capital investments or technical barriers.

Despite the growing prevalence of Artificial Intelligence in business discourse, empirical evidence on its tangible productivity benefits for SMEs has been limited and sometimes inconsistent. This ESRC-funded study, developed in collaboration with Oxford Brookes University, helps fill that gap by demonstrating a clear correlation between Artificial Intelligence adoption and productivity gains for UK SMEs. Professor Brown emphasized that increasing Artificial Intelligence uptake could be pivotal in addressing longstanding productivity challenges among underperforming UK small businesses and potentially support national economic growth initiatives promoted by government policymakers.