Unlocking Regional Growth: The impact of AI adoption by SMEs
WPI Strategy, in partnership with Microsoft, has launched a major new report looking at the impact on regional growth the adoption of Generative AI could deliver. Unlocking Regional Growth: The Impact of AI Adoption by SMEs highlights how accelerating Generative AI adoption among small and medium-sized enterprises (SMEs) could unlock £78.1 billion in productivity gains across the UK economy by 2035.
While large businesses are already embracing and incorporating AI tools into their operations, SMEs – which make up 99% of UK businesses – face barriers including cost, digital skills gaps, and limited awareness. However, the agility of SMEs means they are well-placed to rapidly benefit from this transformative technology with the right support.
The regional analysis found that over the next decade, Generative AI adoption among SMEs could transform economic growth:
West Yorkshire could see a £4.6 billion uplift in economic vale
Liverpool City Region could benefit by as much as £2.8 billion
Cardiff Capital Region could unlock £2.4 billion in additional economic output
The report sets out a roadmap for how national and local leaders can support SMEs to adopt Generative AI:
Create regional ‘AI champions’ across the four nations and put AI at the heart of all Local Growth Plans – put regional mayors and local authority leaders in the driving seat by ensuring all Local Growth Plans establish a coordinated local approach to greater digital adoption, especially Generative AI adoption.
Launch regional Generative AI ‘adoption challenges’ – pilot local programmes offering SMEs hands-on advice, training and planning to support SMEs in their adoption of Generative AI.
Explore incentives to drive SME digital adoption – look to create both national and regional incentives designed to bring forward business investment in digital adoption and tackle access to finance barriers.
Generative AI represents a once-in-a-generation opportunity to boost productivity, support regional growth, and deliver better jobs. However, the report urges that action is needed now to ensure SMEs are not left behind.
The report was launched today at a Parliamentary roundtable, chaired by Daniel Aldridge MP and with Hugh Milward, Vice President for External Affairs at Microsoft.
Read the full report here
Hugh Milward, Vice President, Microsoft UK, said: “Small businesses are the backbone of the UK economy but without targeted support, the country’s ambition for growth will falter. The £78 billion opportunity isn’t just a number – it’s growth that should be felt in communities from Kent to Cumbria.”
“To unlock it, we need coordinated action from government, regional mayors, and industry to put the transformative benefits of AI into the hands of the people and businesses driving regional growth.”
Feryal Clark MP, Parliamentary Under-Secretary of State for AI and Digital Government said:
“Generative AI is a game-changer — not just for the big players, but for small businesses and communities in every corner of the UK. This research highlights the huge potential generative AI offers smaller businesses when they get the support they need to use it — cutting admin, saving time, and ultimately driving growth.
“Building a thriving regional AI sector is essential to making sure everyone can benefit from this technology. That’s why we’re backing businesses with the tools, tech and training they need — and working with local leaders to put AI at the heart of a stronger, fairer economy as part of our Plan for Change.”
Tracy Brabin, Mayor of West Yorkshire, said:
“This research shows just how important AI adoption is to the future of our region. If small businesses across West Yorkshire embrace Generative AI, we could unlock a £4.6 billion boost to our economy over the next decade - that’s growth we simply can’t afford to miss.
“Our region is home to thriving clusters of creative, digital, and high-tech businesses - but too many still face barriers to adopting the tools they need to stay competitive.
“We’re ready to work with the Government and industry to make sure every business in West Yorkshire has access to the skills, support and infrastructure to harness the power of AI and drive inclusive, long-term growth.”
Steve Rotheram, Mayor of the Liverpool City Region said:
“AI is already reshaping the world – and with the right investment, support and guardrails, it has the power to do a lot of good. But we’ve got to make sure it’s not just the big firms that benefit.
Here in the Liverpool City Region, we’re building the foundations to be a global leader in AI for good. From our ultrafast digital network to piloting AI in local schools, we’re backing our businesses with the tools to grow, compete and lead in this new era.”
Dan Aldridge MP, Chair of the All-Party Parliamentary Group on Digital Inclusion, said:
“This report makes clear that unlocking the full potential of AI means ensuring no business is left behind. Too many SMEs still face barriers to adoption — whether it’s a lack of time, digital skills or confidence — and we need to close that gap.
As Chair of the APPG on Digital Inclusion, I’m committed to ensuring that the benefits of emerging technologies like Generative AI are felt across the whole economy, particularly in towns like Weston-super-Mare where communities are too often an afterthought in policies largely designed for cities.
That means targeted support, strong local empowerment and community involvement, as well as a national strategy that puts small businesses at the heart of the UK’s digital future.”
Sue Daley OBE, Director, Technology and Innovation at techUK said:
If the Government wants the UK to be more globally competitive, it is essential that we empower our SMEs to adopt AI technologies more quickly. This requires decisive action on the barriers identified in this report – including access to finance and digital connectivity. By tackling these barriers, we can ensure that SMEs across all regions of the UK are more productive, more resilient, and more competitive.
Craig Beaumont, Executive Director of the Federation of Small Businesses (FSB) said:
“AI represents a huge opportunity for small businesses, if the barriers to adoption can be tackled. Our research shows that 55 per cent of small businesses think AI could provide their business with potential benefits, but 46 per cent are held back by a lack of skills and/or knowledge to utilise it successfully. Many also experience financial cost and a lack of time as barriers to innovating.”
Anthony Impey, Chief Executive of Be the Business said:
“Every SME leader who I speak to is interested in learning what Generative AI can do for their business. For many, they’re exploring how it can help navigate challenging economic conditions and rising costs. For others, they recognise that it’s a potential game-changer, helping boost competitiveness and productivity. And yet, SME leaders frequently find that they simply don’t have the capacity to implement this technology. What’s needed is a set of practical measures to make this happen – which is what this report achieves.”
Naomi Weir, Innovation and Technology Director of the Confederation of British Industry (CBI):
“Business adoption of digital technologies, such as AI, offers immense opportunities to kickstart the sustainable growth we need across the country. The findings in Microsoft's report chime with what we hear from members up and down the country, that barriers like skill gaps, limited access to finance, and concerns over regulatory compliance and security continue to hold businesses back, especially SMEs.
We know peer-to-peer learning and locally delivered support are particularly important for SMEs so we echo calls to build on successful initiatives like Made Smarter, offering tailored advice, funding, and hands-on support to help boost productivity and accelerate business journeys towards innovation and growth.”