Adopting AI could boost the productivity of small and medium businesses by up to 133%

New research from the University of St Andrews has found that Artificial Intelligence (AI) has a significant positive impact on productivity levels for small and medium enterprises (SMEs) compared to non-adopters.

The study, led by Professor Ross Brown from the University of St Andrews Business School, suggests that adopting AI results in productivity gains of between of 27% and 133%.

The research drew upon the largest small business survey in the UK, the longitudinal Small Business Survey (LSBS), a large and well-known panel dataset conducted by the Department for Business and Trade. The survey interviews just under 10,000 UK SMEs and follows a stratified random sampling design to ensure representativeness by region, sector, and firm size.

Other results show that, in terms of those benefitting from AI, it is firms with lowest productivity levels which are most likely to adopt AI technologies. Additionally, the benefits from AI adoption seem sector specific with service sector firms such as catering and hospitality, particularly prominent among the beneficiaries of AI.

Despite its prominence, evidence on the “AI-productivity nexus” remains sparse and results mixed.  This major ESRC-funded study, in collaboration with Oxford Brookes University, examined the issue of low productivity in UK SMEs.

Commenting on the important findings, Professor Brown said: “Our findings are quite emphatic and show a clear-cut productivity premium for SMEs who adopt AI. Given the UK Government’s mantra about raising productivity levels, increasing AI adoption could potentially play a pivotal role at addressing the endemic problem of weak productivity in poorly performing SMEs. AI  potentially offers SMEs “short cuts” that are easy to yield quick productivity “wins” – such as planning staff rotas and reducing food wastage in a small restaurant – but are relatively inexpensive and easy to enact.”