Small and Medium-sized Enterprises: AI Sector

Lord Ranger of Northwood Excerpts

Thursday 29th October 2026 Lords Chamber

Asked by

[Lord Ranger of Northwood]

To ask His Majesty’s Government what assessment they have made of current business confidence among small and medium-sized enterprises in the AI sector and what actions they are taking to encourage investment.

[The Parliamentary Under-Secretary of State, Department for Business and Trade (Lord Leong) (Lab)]

My Lords, the Government’s core evidence is the AI sector study. The 2024 study found that SMEs make up 96% of UK AI firms, and nearly 90% of firms surveyed expected revenue growth within a year. To encourage investment, the sovereign AI fund, backed by up to £500 million, invests directly in British AI start-ups, alongside free compute through the AI research resource, Innovate UK’s £130 million growth catalyst, and a £100 million R&D procurement scheme.

[Lord Ranger of Northwood (Con)]

My Lords, I thank the Minister for the Answer and welcome the announcements in yesterday’s Budget in support of AI. Across a kaleidoscope of initiatives, the Government announced a total of about £600 million. To put that into context, JP Morgan advises that US hyperscalers driven by AI investment this year alone will invest $697 billion. There is a fundamental difference between investing in AI technology and enabling British businesses to benefit from it. That is where we need to focus. I declare my interest as a co-founder of the Business AI Alliance, a grouping of over 300 British AI tech SMEs that are searching for support from the Government. With the new programme for local funding on AI adoption worth £30 million and focused on Yorkshire, does the Minister recognise the risk of creating a two-tier AI economy where larger businesses and those in selected regions benefit while others fail?

[Lord Leong (Lab)]

My Lords, yesterday’s Budget announcement demonstrates our commitment to turning AI ambition into practical outcomes. Alongside the £700 million in wider AI investment, we are providing, as the noble Lord has mentioned, £30 million for locally led AI adoption partnerships, starting in Yorkshire, and £60 million for an AI pathway fund. These initiatives will help businesses overcome adoption barriers, build skills and improve productivity. Working alongside local leaders in the industry will ensure that funding delivers measurable benefits for British businesses across the country.