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An innovation and governance gap is opening up between businesses that realise the potential of GenAI and those that see its impact as limited, our new report has found.

According to The Critical AI Window, organisations that don’t find ways to capitalise on the potential of AI to drive innovation and growth run the risk of being left behind. As a result, competitive edge is at risk.

Our report shows that less than a third of businesses (31%) are using GenAI, with only one-fifth (22%) seeing it as high value.

Paul Knight, partner at Mills & Reeve said: “There is a clear divide amongst businesses – between those that have bought into AI and are building systems and processes around it, and those that are still unsure of its impact beyond mid- to low-value tasks, such as reducing administration and improving efficiencies and productivity.

“This divide is opening up an innovation and governance gap, as early innovators seize on the opportunities that AI presents. While our research shows that the number of businesses using GenAI is likely to rise to 72% by 2027, the lag in performance between then and now could become insurmountable.”

The report highlights the biggest concerns felt by businesses over AI adoption. The majority (90%) are concerned about inaccuracy, more than eight in ten are worried about safety risks (85%), such as cyber attacks, with the impact on future employment also a cause for concern. However, despite 83% of respondents stating that are worried about regulatory compliance, only 31% of businesses have a risk mitigation strategy in place.

Paul added: “The explosion of GenAI has seen a raft of regulations introduced across the world, with more likely, and all of them subject to change as AI understanding develops. In the UK, the regulation of AI relies on existing legal frameworks such as intellectual property, data protection and contract law, highlighting the growing need for these frameworks to be adapted to address the novel risks and complexities introduced by AI technologies. All this suggests that there will be no steady state for regulation for some time.”

However, the risk of not complying is significant, both reputationally and financially. Within the EU, under the EU AI Act, for example, violations can cause administrative fines of €35 million or 7% of total global turnover, whichever is greater.

“There is a real need for businesses to set their own guardrails as legislation in the UK catches up. If they don’t fully understand the legal and ethical boundaries – whether around data protection, intellectual property, or equality law – the consequences could be profound. A single misjudgement could expose the organisation to group litigation.”