This paper investigates Artificial Intelligence (AI) adoption and its labour market conse-quences among UK small and medium enterprises, using novel data from the British Cham-bers of Commerce Business Outlook Survey, collected in early 2026. AI adoption is increas-ingly widespread, with over half of responding firms currently using AI, up from around a third in 2025. Most users rely on generic tools such as ChatGPT or Copilot, but around one in ten firms have adopted bespoke AI implementations. We find that bespoke adoption in par-ticular is associated with a coherent bundle of workforce adjustment. Approximately one-fifth of bespoke users report staffing reductions attributable to AI, and bespoke adopters are roughly three times more likely to have restructured job roles. Restructuring is in turn strongly associated with headcount reductions and shifts in skills requirements. Surprisingly, firms investing in AI-related training are significantly more likely to anticipate headcount reductions than those not investing in training. We also find that current AI users are substan-tially more optimistic about future productivity gains than non-users. Our findings provide a novel firm-level picture of how SMEs are reorganising work, adjusting workforces, and in-vesting in skills in response to AI.
https://www.iser.essex.ac.uk/wp-content/uploads/files/working-papers/iser/2026-01.pdf