A shifting labour market, and a familiar pattern of reinvention
As the UK labour market adjusts to a new economic reality, recent data from the Office for National Statistics shows unemployment rising to around 5.2%, its highest level since 2021.
This shift reflects broader global patterns, where hiring is slowing and many traditional roles are being reshaped by automation and artificial intelligence. While numbers alone do not always capture the real picture, history tells us that periods of disruption have often acted as catalysts for reinvention. That is also true of what we are experiencing now.
Starting a business out of necessity
Enterprise Nation’s annual Start Up Ambition Report 2026 found that 1-in-4 adults expects to start a business in the next 12 months, and for the first time economic necessity, rather than opportunity, is the primary driver.
What we are seeing is a growing cohort of people building businesses alongside or instead of employment. For policymakers, this moment presents a clear opportunity. If business support can evolve quickly enough to meet people where they are, economies could become more resilient, more adaptive and better equipped for long-term change.
Small businesses and AI: willing, but uncertain
Small businesses are already using AI, often through tools embedded in everyday software such as accounting platforms, customer relationship management systems or marketing tools. The benefits can be tangible: results from the 2025 D4SME survey show that 91% of SMEs using generative AI reported productivity boosts. What they frequently lack is confidence and clarity about what comes next.
SME owners are typically time-poor and cautious with cash, particularly in uncertain economic conditions. In 2025, the main barriers to digitalisation remained maintenance costs (40%), lack of time for training (39%), and hardware costs (32%). At the same time, uncertainty about how to use AI and the risks involved, such as harmful content, copyright and legal issues, inaccurate information, and data privacy remains widespread, though they tend to lessen with experience.
For many SMEs, the key expectation is therefore clear: they want AI to fit naturally into their existing workflows in a way that feels intuitive, safe and genuinely useful.
As Sue Keogh, founder of Sookio explains:
“Using AI has saved me hours, particularly on research and synthesising information, but where I draw the line is getting it to actually do the work for me. I do not want it to build the communications strategy or do the writing. Those are human skills, and they matter. Used well, AI supports better thinking, not replaces it.”
Support exists, but awareness does not always follow
This confidence gap exists despite significant government investment in digital capability, AI skills and innovation.
In a recent survey of 185 small business owners within our community, 64% said they were unaware of government initiatives designed to support them, and a recent OECD survey found that only 21% of respondents were aware of government support for digitalisation. Even well-designed schemes struggle to deliver impact if business owners do not recognise themselves as the intended audience or cannot clearly identify which support is relevant to their stage of growth.
Using AI to improve delivery, not just adoption
It’s great to see the UK Government’s new rollout of the AI skills hub, making AI skills accessible for all. Governments should be asking how AI can improve the design, targeting and communication of support, not only how small businesses should adopt it.
The gap between ambition and action remains significant. An EY survey of nearly 500 senior government executives across 14 countries found that while 64% recognised AI’s potential to reduce costs and 63% saw its value for improving service delivery, only 26% had integrated AI across their organisations, and just 12% had adopted generative AI in practice.
Source: EY (2025), How can the transformative power of data and AI drive better public value?
Learning from international models
Singapore offers a compelling example. Through its Singpass ecosystem, the government uses digital identity and AI to surface relevant services based on life events, giving citizens and businesses access to more than 2 700 services through a single secure identity.
Applied to small business support, the question becomes: what if founders did not have to search for help at all? Proactively surfacing relevant programmes, such as skills initiatives, grants and funding opportunities, based on a firm’s sector, size and stage, for example using open finance data, could help close this gap. This is not about creating more schemes, but about smarter activation of the ones that already exist.
Preserving the human core of entrepreneurship
At the same time, it is essential to retain the human core of entrepreneurship. Building a business requires effort, experimentation and creativity. There is value in the process itself, in learning through doing, and in the sense of progress that comes from overcoming challenges.
This is where upskilling becomes critical. The most effective use of AI gives founders and teams the confidence to experiment while maintaining ownership of their ideas, standards and culture.
As Reem, founder of Reem Web Design, puts it:
“AI has become a real support tool in my day-to-day work, from speeding up research and refining messaging to troubleshooting technical issues. It has significantly reduced the time spent on repetitive tasks, allowing me to focus more on strategy and client relationships. That said, AI still requires strong human oversight, especially when it comes to brand voice, accuracy and design decisions.”
What policymakers should do now
Continued investment in digital skills and AI capability matters, but it must be matched by an equal focus on awareness and activation. Trusted private sector intermediaries, organisations like Enterprise Nation that small businesses already rely on, should form part of the delivery infrastructure, helping governments reach founders in language that resonates.
Success should be measured not by the number of programmes available, but by the number of businesses that find, understand and benefit from them. Governments should use AI to reduce friction, improve targeting and reach entrepreneurs at the moment when support can make the greatest difference.
When small business owners can access the right support at the right time, they build, scale and remain rooted in their local economies. In a period of disruption, that is both good policy and good economics.
Find out more about our work on Entrepreneurial Ecosystem Diagnostics and AI adoption by small and medium-sized enterprises. Dive deeper into related topics: Job Creation and Local Economic Development 2024, Entrepreneurial Ecosystem Diagnostics of Spain and Scaling Up Public Financial and Non-Financial Support for SME Sustainability.
Polly Dhaliwal is Chief Operating Officer at Enterprise Nation, a leading small business support community that reaches more than one million entrepreneurs and SMEs across the UK. Enterprise Nation connects founders with the knowledge, tools and community they need to start and grow successful businesses, working in partnership with government, corporates and industry leaders to deliver practical support programmes that help small businesses gain access to finance, new markets, digital skills, talent and opportunities.
In her role, Polly works closely with policymakers, partners and entrepreneurs to strengthen the UK’s small business ecosystem, with a particular focus on digital adoption, AI, and the role of technology in enabling entrepreneurship and economic resilience.
Alongside her work at Enterprise Nation, Polly is the founder of Girls in Movement, a not-for-profit initiative that supports girls through education, confidence-building, and global perspectives, helping the next generation develop the skills and mindset to thrive in an increasingly digital world.