London small firms lead UK in AI use, survey finds

Small businesses in London are the most likely in the UK to be using artificial intelligence, according to research from Novuna Business Finance. The survey found 41% of small firms in the capital already use AI.

Nationally, the figure was 31%. Meanwhile, 27% of small businesses said they did not plan to use AI and 21% said it was not relevant to their business. In London, just 12% said AI was not relevant, the lowest proportion in the UK.

The findings suggest faster uptake in the capital at a time when views on AI remain divided elsewhere in the country. They also point to a link between adoption and business performance.

Among small businesses reporting significant growth this quarter, 59% said they were using AI, compared with 23% of businesses experiencing contraction.

Growth link

Jo Morris, Head of Insight at Novuna Business Finance, said the figures suggest AI use is becoming more common among expanding firms and remains strongest in London.

"The Government's backing of AI has significant potential to drive economic growth across the UK, and our data shows there is a correlation between small business growth and AI adoption. For example, AI adoption is more prevalent among small businesses that are significantly growing this quarter (59%) than among those experiencing contraction (23%).

"For many years, our Business Barometer tracking research has shown London to be the engine room for growth forecasts among UK small businesses, and the percentage of London-based businesses predicting growth each quarter is usually well above the national average. When it comes to AI, small businesses in the capital once again seem to be leading from the front. Rather than being resistant to change, they are more likely to be embracing what AI can offer. At Novuna Business Finance, we support established enterprises to fulfil their true potential and, for many, that will involve embracing technology and innovation to make operations faster, more efficient, and to free up cash flow and working capital."

The research also explored how London firms are using AI. The most common use was improving back-office or operational efficiency, cited by 23% of respondents already using the technology.

Another 19% said they used AI for market research and product development, while 15% said it was helping to improve online and digital marketing.

Knowledge gap

Outside London, the data suggests hesitation is partly linked to a lack of understanding. Across the UK, 29% of small business owners said they did not fully understand how AI could be used in their business.

That leaves a sizeable group of firms that are not rejecting the technology outright but remain unsure how to apply it. The split between businesses already using AI and those unconvinced of its relevance points to uneven adoption across regions and sectors.

Ruth Harrison, Chief Executive Officer and Founder at Encore iQ, said the research reflects what many smaller organisations are experiencing as they weigh up whether and how to adopt AI.

"AI adoption is accelerating; however, AI knowledge and AI readiness are uneven across the UK. We consistently see SME organisations wanting to engage with AI but lacking the clarity to begin. This is reflected in the 29% who say they don't yet understand how AI applies to their business. At Encore iQ, we see this gap every day, and our AI Readiness work focuses on helping organisations build the confidence, capability and foundations they need to adopt AI safely and prepare for future scale."

The survey was based on responses from 1,000 small businesses and offers a snapshot of how owners view AI at a time of growing policy attention on the technology. The findings suggest London remains ahead of the rest of the UK in both business growth expectations and willingness to adopt new digital tools.

One of the clearest findings was the gap between the capital and the national picture: 41% of London small businesses said they already use AI, compared with a UK average of 31%.