Recent revelations about smaller manufacturers and their slower-than-anticipated take-up of AI have highlighted a wider trend in the small business sector towards digital transformation. What is holding back firms and how can they solve this problem?

According to new research from Make UK and Autodesk, UK manufacturers are missing out on innovation and productivity benefits because of a cautious approach to investing in AI and other forms of digital technology. Notably, the report reveals that larger firms are twice as likely to take such steps than SMEs.

This lower level of adoption in manufacturing is reflective of an attitude that spans the small business industry spectrum. While some of the uses of digital technology outlined in the report are specific to manufacturing, most can be applied to any sector. For example, firms are using AI to increase efficiency, improve productivity, develop decarbonisation and increase investment.

The report claims that by failing to integrate AI and other digital technology into the workplace, businesses are losing out on increased profits and future work. At a time when small firms continue to face highly challenging market conditions, they cannot afford to be missing out growth opportunities and revenue streams.

Funding digital tech investment and how alternative finance can help

Interestingly, in terms of the barriers that are slowing the adoption of AI and other digital technology by UK manufacturers, the Make UK and Autodesk report cites a lack of knowledge of how to apply the technologies and limited access to technical and digital skills.

The barriers are no different for small businesses – and these findings echo those put forward by the Made Smarter programme earlier this year. Critically for smaller firms, what underpins the difficulty in overcoming the challenges relating to training and recruitment, as well as those linked to investment in software and hardware, is cost.

How can businesses combine investing in digital technologies with safeguarding cash flow? Alternative finance can help.

Services such as invoice finance, asset finance and peer-to-peer lending are proving a vital source of capital for small businesses in the current funding climate (with 65% more SMEs experiencing difficulty in accessing finance from high-street banks). These alternative finance facilities, which offer a more easily accessible, affordable and personalised approach to lending, are helping small businesses survive and target recovery, stability and growth.

This profile has helped cement the reputation of alternative finance in the business sector. Notably, the new Growth Guarantee Scheme will provide a wide range of finance facilities to smaller firms, including asset finance, invoice finance and asset-based lending. This is further proof that alternative lenders are increasing filling the small business funding gap.

Small firm finance options for funding AI integration

Small businesses could wait for governmental help with regard to the greater adoption of AI and other digital technology – something that industry groups are increasingly calling for – but such a wait-and-see approach comes with not insignificant risk. Miss out now and future development and performance could be affected.

Smaller firms need to find a way to access the finance in order to invest. This is why it is important that small business owners and management are aware of all the finance options available to them, including the services of alternative lenders

To find out more about A&T Business Associates services, contact Steve Bowles on 01903 602211 or steve.bowles@atbusinessassociates.co.uk.