At the start of 2025, everyone predicted businesses would be leveraging AI by year-end.
That didn’t happen.
We watched SMEs spend twelve months on what we call AI disablement—setting up guardrails, creating policies, establishing the “must nots,” and bringing in the AI police. What didn’t happen was AI enablement—actually using AI to automate, innovate, and make things better, quicker, and easier.
The numbers tell the story. Only 31% of UK SMEs currently use AI, with nearly 7 in 10 having no adoption plan according to YouGov research from August 2025. This isn’t caution. This is paralysis.
The IT Problem Nobody Expected
Here’s what we see repeatedly: SMEs ask an in-house person to lead on AI. Usually IT people.
They focus on what they know—policies and rules. Not the commercial opportunity. Not customers. Not sales. Not marketing. They default to risk management instead of growth because that’s their training.
The result? SMEs spend all of 2025 building policies but have zero AI-driven revenue or efficiency gains to show for it.
We hear the same frustration in every conversation. Leaders worry they’re being left behind. They know something is wrong.
The Shadow AI Crisis
The irony is brutal. By trying to control AI risk, SMEs created more uncontrolled risk.
Employees started using their own mobiles to download their own apps. They wanted to do their work without asking permission. One in four employees now use unapproved AI tools, with 38% sharing confidential data with AI platforms without approval.
The AI police approach pushed activity underground rather than preventing it.
A Microsoft study found that 75% of workers already use AI at work, with 78% using their own tools to do so. MIT’s 2025 State of AI in Business report revealed that while only 40% of companies purchased official LLM subscriptions, employees in over 90% of companies regularly use personal AI tools for work.
People upload company information and take unknown risk with the best intentions to help the business. The workforce split in half—those using AI constantly and those not using it at all.
What the Winners Did Differently
The SMEs who got this right did something simple.
They set up their AI policy, rules, and selected business tools. They put it into a playbook and trained their teams in month one. Then they focused on what mattered—leveraging AI to solve real business problems.
Month one versus all year. That’s the difference.
These SMEs tackled the lowest hanging fruit first: automating manual processes. Find the most time-consuming manual process, automate it, and repeat. After that comes innovation.
You can’t innovate when you’re drowning in manual work. Free people up from the manual work, then they can innovate. But they can’t innovate until the bottlenecks are solved because they’re too busy keeping the lights on.
The 10x Productivity Gap
By the end of 2025, we’re seeing a measurable difference between SMEs that automated their bottlenecks versus those that spent the year in policy mode.
10x productivity improvements.
Things that took hours or days now take minutes. This means a team can do so much more. This means businesses can focus on lead generation and acquiring more customers.
The ONS confirms businesses deploying AI achieve 19% higher turnover per employee. Organizations investing $10 million or more in AI report significant productivity gains at a rate of 71% versus 52% for smaller investments. Experimental studies show productivity gains ranging from 5% to over 25% when using generative AI tools.
While 72% of large enterprises report productivity gains from AI, only 55% of SMEs say the same. The advantage gap is widening.
The Real Barrier
If 10x productivity is the prize, why aren’t more SMEs racing to get there?
They focus on the cost of AI rather than seeing it as an investment to grow their business. They don’t compare the cost to the cost of an employee—where usually the AI build cost is one-quarter of an employee’s cost or less.
Most AI projects are cost-neutral within 12 months at worst, if they’re done right. Among organizations experiencing AI-driven productivity gains, 56% report significant improvements in overall financial performance, with 96% seeing some kind of productivity gains.
The problem is rushing to get started without proper planning.
The Discover and Design Imperative
Not doing a proper Discover and Design process wastes money and time.
Not doing ‘Discover’ well enough means not capturing detailed requirements, not reviewing the current process properly, not reviewing current technology. Not doing ‘Design’ well enough means not creating user journeys or wireframes or architecture diagrams, so people don’t know what is being built.
It’s like sharpening your saw before starting to cut down the tree.
Do the upfront work. The EU AI Act takes full effect in August 2026, imposing strict compliance requirements. Governance is no longer optional but legally mandated for SMEs operating in Europe. Enterprise AI spending surged from $11.5 billion in 2024 to $37 billion in 2025—a 3.2x year-over-year increase.
What 2026 Demands
SMEs must act now or get left behind. Here’s what you need to do:
Identify your biggest process consuming manual effort and automate it. Solve your biggest bottleneck first.
Create a playbook for all staff. Everyone needs to know what they can and can’t do with AI.
Upskill your people. Reduce the growing divide between the AI-powered and the non-AI users. Only 28% of UK businesses are fully embracing AI across their organization.
Get hands-on yourself. Don’t delegate this. Leaders need to understand what’s happening.
Deliver AI enablement on top of AI disablement. Balance governance with growth.
Bring in external AI experts. Get new perspectives you don’t have internally.
Combine IT people with commercial people. Work together on AI projects so you get both sides of the picture.
It’s Not Too Late
For SME leaders who realize they wasted 2025 on policies and now see competitors pulling ahead with 10x productivity gains, there’s still time.
Start now.
The SMEs that will dominate their markets by the end of 2026 will have something the laggards won’t understand: a culture where people know they need to leverage AI to improve their team’s performance. They will be measured on leveraging AI to automate and innovate.
The UK’s AI Adoption Taskforce set the goal that by 2035, UK SMEs should be the most digitally capable and AI confident in the G7. Current trajectories suggest this requires immediate action.
AI adoption by SMEs could boost the UK economy by £78 billion in added economic value over the next decade. But fewer than one in five UK SMEs have adopted AI. Regional disparities are stark: 82% of London firms see AI as strategically important versus only 44% in the North of England.
The window is narrowing.
We’ve seen what happens when SMEs spend a year on policies instead of implementation. We’ve seen the shadow AI crisis. We’ve seen the 10x productivity gap open up between early adopters and those still planning.
2026 demands action. Start with proper Discover and Design. Build your playbook in month one. Then focus on solving real business problems.
The competitive advantage goes to those who move now.
