As reported by SME News, more than half of UK small and medium-sized enterprise owners now regularly use AI tools to support business decisions

However, a recent study evaluating over 3,000 AI-generated responses found that 45% contained at least one significant issue, and around one in three included missing or misleading attributions. Experts warn that reliance on AI carries serious legal risks, particularly under the EU AI Act. Organisations that place AI systems on the EU market – or whose AI outputs are used within the EU – could face fines of up to €35 million (£30 million) or 7% of worldwide annual turnover for the most severe violations.

One key area of concern is copyright and intellectual property. AI-generated content may unintentionally infringe on copyrighted material, leaving businesses exposed to legal claims. Accuracy is also a problem: the study found that 20% of AI outputs contained major errors, including fabricated or outdated information. In March 2024, a chatbot reportedly provided dangerously incorrect advice that could have led business owners to break the law, such as falsely suggesting they could dismiss employees who raised sexual harassment complaints.

Data protection is another critical risk. AI systems rely on vast datasets that often include personal information about customers, employees, or third parties. Using such data without proper consent or anonymisation can result in significant fines and reputational damage.

The rapid pace of AI innovation has prompted governments worldwide to introduce new regulations, including the EU AI Act and the Data (Use and Access) Act 2025 (DUA). Experts caution that businesses failing to keep up with these evolving rules risk serious legal consequences, including regulatory enforcement, lawsuits, or substantial financial penalties.