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Reeves’ Budget Could Make or Break Microsoft’s £78bn AI Adoption Promise for SMEs

ended 11. November 2025

Microsoft claims small-business AI uptake could add £78bn to the UK economy by 2035. But without Budget incentives cash-strapped firms may never see that growth.

New research from Microsoft and policy consultancy WPI Strategy reveals that AI adoption by small and medium-sized businesses could boost the UK economy by £78 billion over the next decade, with significant regional growth opportunities across the country. 

The report comes as the government prepares its upcoming Budget, with business groups calling for AI investment incentives to be included.

The report, "Unlocking Regional Growth: The impact of AI adoption by SMEs," shows West Yorkshire could see a £4.6 billion uplift by 2035, Liverpool's economy could gain £2.8 billion, and the Cardiff region would benefit from a £2.4 billion boost. It also reveals the extent to which generative AI tools such as Microsoft 365 Copilot could supercharge small businesses by streamlining tasks ranging from document drafting to bookkeeping.

Microsoft's report sets out three key recommendations:

  • Creating regional "AI champions" across the four nations to drive improvements to digital infrastructure and address skills gaps
  • Piloting a regional Generative AI "adoption challenge" offering practical support to help SMEs identify use cases
  • Exploring incentives to help smaller companies invest in GenAI tools, software and advice

However, fewer than one in five UK SMEs have currently adopted AI, and the rate of take-up has not kept pace with government predictions. The research identifies several barriers hindering SME adoption, including an AI skills gap, limited capacity to trial and implement AI, inconsistent access to digital connectivity, and financing challenges for growth investment. For example, even in an urban area like Liverpool, a tenth of businesses don't have access to the basic internet connectivity required to work with AI. 

We want your views:

  • What does the chancellor need to announce in the budget to help businesses use this opportunity?
  • Is the £78bn opportunity realistic when current SME adoption rates remain below 20%?
  • What's the real barrier stopping small businesses from implementing AI: skills or trust?
  • Can regional AI champions and government initiatives genuinely address SME concerns about AI reliability, when it is a global issue?
  • How do we ensure AI tools work for stressed business owners without IT departments, not just in corporate demos?
  • Is the productivity promise dependent on AI speed plus human experience, or does automation risk eliminating the learning curve?
     

3 responses from the Newspage community

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Colette MasonVerified
AI Ethics Consultant at Clever Clogs AI
AI could add £78bn to the economy, but only if small businesses can afford to join the game. Right now, they can’t. With NICs hikes, rising software costs and zero clarity on what’s genuinely deductible, the Budget’s AI rhetoric risks becoming a Westminster fairytale, not a national growth plan.

Most SMEs aren’t waiting for a chatbot revolution; they just want tools that save time without wrecking cashflow. Yes, many AI costs are technically deductible, but if owners can’t spare the money up front, that relief arrives too late.

If the Treasury wants that £78bn boost, it’s not more pilots or promises they need. It’s policies that let hairdressers, accountants and architects invest with confidence, not just corporates with cash reserves.

Right now, as the cost-of-operating crisis escalates, that cash-rich position simply doesn’t exist for far too many British businesses.
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Pete MuglestonVerified
Mortgage Advisor & Managing Director at onlinemortgageadvisor.co.uk
The report shows that the majority of AI useage by businesses is centred around generating ideas, looking up information, or assisting with writing-based tasks. This is helpful, but I'm sceptical of the productivity claims given where the current technology is.

We will likely need to see AI capabilities expand to complex tasks and workflows to deliver the kind of economic boost claimed in the report. £78bn of additional output would represent a 3% uplift to the entire UK economy.
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Patricia McGirrVerified
Founder at Repossession Rescue Network
AI won’t unlock regional growth if small firms can’t afford the key.

The £78bn promise means nothing if small businesses can’t reach the starting line. We need meaningful adoption of AI, not a wave of quick-fix prompt hacks and packs. Firms need the time, training and support to adapt AI in ways that deliver both efficiency and quality. You can’t level up the economy when one in ten businesses still struggle for basic connectivity. Without access, skills and substance, the AI revolution will pass small firms by.