The AI Revolution: What Businesses Need to Know About Upcoming Regulation

As AI adoption grows, regulators are sharpening their focus on responsible use. 

Presently, there are no specific legislative acts in the UK that comprehensively regulate AI. However, the European Union has introduced the EU AI Act, which is anticipated to come into full force by August 2026. This law establishes a risk-based approach, classifying AI systems according to their effect on individuals and society. 

The EU AI Act is notable for its wide scope and will directly affect UK businesses. It divides AI systems into risk categories:

• Unacceptable-risk AI (such as social scoring or manipulative behavioural systems) will be banned entirely.
• High-risk AI — used in areas like recruitment, credit scoring, healthcare, and critical infrastructure — will face strict requirements. These include transparency obligations, detailed risk assessments, human oversight, record-keeping, and conformity assessments before market entry.
• Limited-risk AI, such as chatbots or image recognition tools, must disclose when users are interacting with AI.

Although it is EU legislation, the Act will impact companies both within and outside the EU. UK businesses trading in the EU or whose AI outputs are used in the EU will need to comply- for example: EU-based users of AI systems will be able to seek recourse against providers, even if based outside the EU.  

Preparing in advance is critical for businesses looking to minimise legal risks. Practical steps might include amending supplier and customer contracts, clearly assigning compliance duties, reviewing data governance policies, and conducting proper due diligence for AI-related transactions. 

For more information on how the EU AI Act could influence your operations and planning for compliance, contact me, James Macdonald here or our Commercial law team. 

The contents of this article is a general guide only at the date of publication. It is not comprehensive, and it does not constitute legal advice. Specific legal advice should be sought in relation to the particular facts of a given situation.