Small businesses based in London are the most likely in the UK to say they are already using AI to support their enterprises – 41% compared to the national average of 31% – and AI adoption correlates with business growth, according to new research from Novuna Business Finance.
At a time when the Prime Minister’s new AI Taskforce has been created to accelerate the adoption of AI across government and to drive economic growth, the business confidence towards AI in the Capital is at odds with mixed feelings across the rest of the country. The national average figures reveal that only 31% of small businesses are using AI, whilst 27% of UK small business said they didn’t plan to use it and a further 21% didn’t believe AI was relevant to their business. In contrast, small businesses in London were the least likely in the UK to say that AI was not relevant to their enterprise (12%).
The evidence of more mixed feelings towards AI from small businesses outside London is also linked to a knowledge gap – with 29% of small business owners openly saying they don’t fully understand how AI could be used in their business.
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Positive uses of AI
For small businesses in London that already embrace AI, the key benefits cited included: using AI to make back-office or operational processes more efficient (23%), employing AI to help with market research and product development (19%) and using AI to enhance online and digital marketing capabilities (15%).
Jo Morris, Head of Insight at Novuna Business Finance comments: “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 it is among those enterprises 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 a capital once again seem to be leading from the front; rather than being resistant to change, they are more likely to be embracing what is possible from AI. 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.”
Ruth Harrison, CEO & Founder at Encore iQ adds: “AI adoption is accelerating; however, AI knowledge and AI readiness is 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.”
Encore iQ is a modern advisory partner built for the AI era that helps SME and mid‑market organisations to prepare for agent‑enabled operating models – and enables them to adopt and scale AI with confidence, clarity and responsible execution.
The research was conducted among a representative sample of 1,000 small businesses. The research was conducted online between 5-8 July 2026.