UK SMEs struggle to keep pace with AI governance

By Puja Sharma

AI incidents hit almost one in three UK SMEs as adoption accelerates

Businesses ramp up AI governance spending in response, with 78% increasing investment as AI becomes embedded across day-to-day operations

– UK organisations are rapidly expanding their use of AI without the capabilities needed to govern it effectively, according to new research from AI Score.

The study of 250 senior decisionmakers found that while 92% of organisations are using AI beyond pilot projects, just 16% have a complete and up-to-date inventory of their AI assets and only 27% can identify the data, tools and permissions accessible to every AI system.

The findings reveal a disconnect between organisations’ confidence in their AI governance and the reality underpinning it. While 59% believe their current approach governs AI effectively, the reality looks different. Among those confident organisations, only 24% have a complete AI inventory. Just over a third (35%) have full visibility of what their AI systems can access.

That lack of visibility is consequential. Almost a third (31%) of organisations are aware of having experienced an AI incident or near miss. Shadow AI was the most commonly reported incident type (51%), while 44% said confidential or sensitive data had been entered into an AI tool.

The pressure to prove AI governance is growing

Pressure is also increasingly coming from outside organisations. More than four in ten (43%) have been asked by an external party to provide evidence of how they govern AI. Among organisations that have faced this scrutiny, 56% say requests for evidence are becoming more frequent.

In response, businesses are investing more heavily in governance. More than three-quarters (78%) are increasing their AI governance investment, while 84% believe strong AI governance is becoming a competitive advantage.

The shift comes as organisations face growing pressure to adopt increasingly capable AI systems while demonstrating that they can do so responsibly. In the UK, policymakers are seeking to accelerate responsible adoption through initiatives such as the AI Growth Lab, while investment is also being directed towards strengthening the country’s AI assurance ecosystem.

Board oversight also appears to make a difference. Just 17% of organisations report on AI governance at every relevant board or risk cycle, but those that do have significantly greater visibility over their AI. Nearly eight in ten (79%) have a complete or mostly complete AI inventory.

However, policies and training remain much more common sources of governance confidence than operational controls. Among organisations that believe their governance has kept pace with AI adoption, 67% cite employee training and 64% a central AI policy as reasons for confidence. By comparison, just 26% cite having an AI inventory, 33% technical guardrails and 37% board oversight.

Sir Jeremy Fleming, former Director of GCHQ and adviser to AI Score, said: “The mismatch between the pace of AI’s development and our confidence in its governance runs through this report. Without sufficient visibility and measurement, too many enterprises are unclear what is working. As a result, organisations are failing to adapt, and leaders are not grasping the distance between ambition and reality. The Rubicon has been crossed. The choice now is whether leaders govern the reality they have today, or the one they remember from the past.”

Alex Harland, Co-Founder and CEO of AI Score said, “AI has moved incredibly quickly from experimentation into the day-to-day operations of businesses, but visibility hasn’t necessarily moved with it. Most organisations believe they are governing AI effectively, yet very few can say with certainty that they know every AI system in use or exactly what those systems can access.

“As AI becomes more capable and autonomous, it becomes increasingly difficult to reconcile. The businesses that understand their AI estate will ultimately be in a much stronger position to deploy the technology confidently, move faster and capture its value.”