The government has announced £7m of funding for 120 artificial intelligence (AI) projects to help small businesses.

The funding forms part of the UK Research and Innovation (UKRI) Technology Missions Fund, with support from the Innovate UK BridgeAI programme, and builds on the “AI opportunities action plan” announced on Monday.

The government has also announced £1m of funding to develop bespoke AI tools to support teachers and transform education.

Labour hopes the funding for small business will enable companies to trial AI in a range of sectors, including agriculture, transport and construction.

The funding – part of its “plan for change” – aims to give people the tools they need to harness the power of new technologies such as AI. Other projects include using AI at a bakery to predict sales and forecast how much of each product needs to be made daily.

There are also plans to deploy AI tools to predict potholes before they form, which would enable roads to be repaired earlier and more cheaply. Another trial involves using an AI model to determine where mould is likely to grow in buildings, which can then be remediated before it becomes a health and safety issue.

Discussing the AI trials and testing, science and technology secretary Peter Kyle said: “Putting AI to work right across the economy can help businesses cut waste, move faster and be more productive.

“The huge range of projects receiving funding today, from farmers and bakers to those tackling potholes on our roads and mould in residential properties, demonstrates the truly limitless benefits of AI that are there for the taking.”

This latest round of government funding for AI is part of UKRI’s £320m investment in “technology missions” to enable new and existing capabilities and capacity in artificial intelligence, engineering biology, future telecommunications and quantum technologies in the years 2023 to 2025 and beyond.

Along with the funding, Innovate UK’s BridgeAI programme has been set up to enable businesses to gain access to training and scientific expertise. The Innovate UK-funded programme, which is delivered by a consortium that also includes Digital Catapult, The Alan Turing Institute, STFC Hartree Centre and BSI, provides advice and guidance to help companies develop their AI innovations.

Esra Kasapoglu, director of AI and data economy at UKRI Innovate UK, said: “The adoption of AI in UK industry is fundamental to supporting the country’s economic growth. Today’s investment will enable us, through BridgeAI, to help more companies to unlock the potential of AI in their business.

“It will also allow further development of projects already demonstrating impact to continue their AI journey.”

In what appears to be a boost to the government’s AI action plan, HSBC has reported that 2024 was a strong year for investment in AI-focused businesses. It announced that UK AI-focused venture-backed businesses raised $4.2bn in venture capital investment in 2024, a 31% increase from $3.2bn in 2023.

According to HSBC, this meant that over a quarter (27%) of all venture capital was raised by AI startups in 2024. HSBC also reported that AI companies closed five “mega rounds” of over $100m, including a $1.1bn round from Wayve.