AI sandboxes are only worth having if small firms get through the door

The King’s Speech on 13 May 2026 promised legislation “to reduce the burden of unnecessary regulation through innovation”: the Regulating for Growth Bill. The background briefing notes published the same day set out the mechanism. The bill will create legal powers to relax existing rules temporarily, under strict controls, so that new products and technologies can be tested in real-world settings, with AI among the named targets and “cross-cutting AI sandboxes” on the list of options being explored.

Two different problems sit behind that promise. One is the startup that cannot launch a product because a rule written for another era stands in its way. The other is the small business that would adopt an AI tool if it knew where the legal lines sat. A sandbox is built for the first problem.

The test of this bill is whether it does anything for the second. On the evidence so far, it will only do so if two things are written in: places for smaller firms, and a fast route from a successful trial to a rule every business can rely on.

Smaller firms need reserved places

The government’s call for evidence on an AI Growth Lab, published in October 2025, set out the pitch for AI sandboxes. Applications would be sought from “start-up innovators, established FTSE companies and global AI developers alike”. Participating companies were anticipated to receive 6.6 times more investment than without sandboxing, the document said, and it cited the Financial Conduct Authority’s (FCA) experience that sandboxes can accelerate time to market by 40%.

If those returns are real, a sandbox place is valuable, and valuable things go to the applicants best equipped to compete for them. A global developer with a policy team will write a stronger application than a startup whose founders also run sales and finance. Without a deliberate allocation for smaller firms, the investment advantage the government describes would flow to the companies that need it least.

The remedy is not complicated. The bill, or the first sandboxes made under it, should reserve a share of places for small and mid-sized applicants and keep the application light enough for a founder to complete without hiring advisers.

Buyers need the rule that follows

Most UK businesses will never take part in a sandbox. Their interest is in what comes out of one. The same call for evidence put AI use at only 21% of UK businesses, and said 60% of businesses responding to an earlier call for evidence saw regulation as a barrier to AI adoption. For a small professional services firm or a regional manufacturer, much of that barrier is likely to be uncertainty: whether a tool that drafts advice or screens applicants breaks a rule nobody has yet interpreted for AI.

A trial settles that question only for the firm inside it. The briefing notes say that if a trial proves successful, the bill will allow the changes to be “embedded permanently into law” quickly. That clause matters more to SME buyers than any single sandbox. Each trial should end with a published finding, a deadline for the regulator to turn it into guidance or a rule change, and plain notice of what any business may now do. The bill also gives ministers a statutory power to issue strategic steers to regulators, and a steer requiring each regulator to publish what its trials have shown would cost little.

Safeguards are the selling point

The government is at pains to say the bill “is not about deregulation”, and the notes promise protections for consumers, workers and human rights throughout any trial. The call for evidence proposed that rules on human rights, consumer rights and redress, workers’ protection and intellectual property could never be modified or switched off in a pilot.

Smaller firms should welcome those limits rather than resent them. A small business that adopts an AI tool carries the reputational risk of a failure with no legal department to absorb it. Clear red lines, fixed in law rather than negotiated case by case, are what let a cautious buyer say yes.

The Regulating for Growth Bill could become the most useful measure in the King’s Speech for AI adoption in UK businesses, or a fast lane for companies that were already moving fast. A sandbox that only its occupants can use is a private garden, not public policy.