UK small firms race to build AI tools without oversight

Pax8 research shows many UK small businesses are building their own AI tools without putting matching governance in place. The survey found that 54% of AI-engaged UK small and medium-sized businesses already use AI solutions regularly.

The findings come from Pax8's latest SMB AI Pulse Report, which surveyed 1,150 small business leaders across the UK, the United States, Germany and Sweden, including 350 in the UK.

Among UK businesses already engaged with AI, 25% said they were prototyping their own solutions, while 19% relied only on off-the-shelf products. The figures suggest a shift among smaller companies from basic adoption to in-house development.

That shift is reflected in the types of systems being built. Some 45% of UK businesses developing AI said they were creating automated workflows that connect AI to other business systems. Another 39% said they were building or testing AI agents that can complete multi-step tasks, while 30% had built custom integrations using an AI provider's application programming interface.

The report suggests competitive pressure is a major factor. Nearly six in 10, or 58%, of UK SMBs said their business would not remain competitive without AI over the next three years, while 56% said they needed to act immediately or within six months.

Governance gaps

At the same time, the research points to weak oversight. Almost a quarter, or 24%, of AI-engaged UK businesses said they had discovered unapproved AI tools, workflows or agents operating in their business within the past six months.

Only 23% said they had a formal, documented review process for internally built AI. That was the lowest figure among all markets covered by the survey, compared with 45% in Sweden.

The findings suggest some smaller businesses are taking on tasks that would previously have been handled by software suppliers or specialist technology teams. Once a company builds an AI workflow or links an AI tool to a finance system, it also becomes responsible for maintaining and securing it, as well as managing its running costs.

Cost pressures

Unexpected spending emerged as another concern. Among UK businesses that had paid for AI in the past year, 39% said they had received at least one bill or usage charge that was higher than expected.

That was lower than in the United States and Sweden, where 57% and 65% respectively reported the same issue. The report said usage-based charging was particularly difficult to forecast as companies built more AI agents and workflows.

The study also found that while AI can reduce workloads, it often creates new review demands for managers. Some 63% of AI-engaged UK businesses said AI had freed up at least some capacity. However, 44% of decision-makers said they personally spent three or more hours each week reviewing, editing or fact-checking AI-generated work, and 6% said they spent 10 hours or more.

Competitive divide

Businesses using AI more deeply were also more likely to say they were ahead of rivals. In the UK, 34% of businesses using AI extensively said they felt ahead of competitors, compared with 10% of those still experimenting with the technology.

The survey also highlighted concerns around data handling. Across all markets surveyed, data security or privacy exposure was the most commonly cited risk linked to employee-built AI, at between 30% and 35%. It also found that 70% of SMBs would pay at least 6% more for greater control over how their data is stored and used.

Pax8 said the research covered business owners, executives, functional leaders and managers involved in technology decision-making at companies employing between five and 499 people. The study expanded beyond earlier US-focused editions to include four countries.

"SMBs across Europe are moving from using AI tools to building AI into the way their businesses operate," said Harald Nuij, Chief Executive Officer, EMEA, Pax8. "As adoption grows, so does the need to address governance, security, cost and accountability. These findings highlight the importance of trusted businesses that can help SMBs bring agents, workflows, data and tools together as a connected intelligence layer. The channel will be central to making that manageable."