UK companies are being urged to tighten controls around the use of artificial intelligence in 2026, as legal experts warn that mismanaged AI systems are exposing companies to increasing legal, financial and reputational risks.
From unclear ownership of AI-generated content to data breaches and misleading results, consultants say many companies have adopted AI tools faster than they have put in place safeguards, leaving them vulnerable in the face of increasing regulation.
Copyright and ownership disputes remain unresolved
One of the most pressing risks for companies using generative AI is the uncertainty surrounding copyright and ownership of AI-generated results. Legal experts warn that AI tools can inadvertently reproduce copyrighted material, leading to disputes over who owns or is liable for the content produced.
A prominent example is the Getty Images vs. Stability AI case, which highlighted the legal gray areas surrounding AI training data. Getty claimed that its copyrighted images were used to train an image generation model without permission. While Getty’s main copyright infringement claim was unsuccessful in the United Kingdom, the court found limited trademark infringement related to early editions that reproduced Getty watermarks, underscoring the legal uncertainty companies still face.
Lawyers say companies should carefully review the licensing terms of any AI tools they use, implement internal review processes to review results for possible violations, and clearly define ownership rights in contracts. Commercial use of AI-generated content is particularly risky when training data sources are opaque.
AI “hallucinations” pose serious business risks
Another important concern remains accuracy. Studies suggest that around 20 percent of results generated by AI contain significant errors, including fake or outdated information. When these so-called “hallucinations” are used to make legal, financial or operational decisions, they can put companies at risk of misrepresentations, regulatory penalties and reputational damage.
In March 2024, it was reported that a chatbot operated by Microsoft gave business owners incorrect legal advice, including advice that could have led to labor law violations. Legal experts warn that similar mistakes could result in fines of up to 7.5 million euros (£6.5 million) if misleading information is provided to regulators.
To mitigate risk, companies are advised to never view AI as the final authority. Human review should be mandatory for high-risk decisions, with clear disclosure if content is AI-generated.
Weak AI governance is a growing burden
Many organizations have adopted AI tools without establishing internal governance frameworks, a gap that consultants call a “ticking time bomb.” Without clear policies, employees may misuse AI systems, enter sensitive data, or fail to recognize harmful or biased results, increasing the risk of data breaches and legal claims.
Legal experts recommend adopting company-wide AI policies that define acceptable usage, establish audit trails, and assign responsibilities for AI-powered decisions. It is increasingly seen as essential to treat AI as a regulated business tool rather than a productivity drain.
Data protection violations are associated with high penalties
AI systems often process large amounts of personal data, including customer and employee information. Using this data without appropriate consent, transparency or anonymization can lead to serious violations of data protection law and result in fines and loss of trust.
Companies are encouraged to minimize data collection, document the legal basis for processing, maintain clear consent records and ensure transparency about how AI systems handle personal data.
Regulation is evolving faster than many companies expect
Perhaps the biggest challenge for 2026 is the speed at which AI regulation is changing. Governments are introducing new rules that may apply in all jurisdictions and, in some cases, retroactively to systems already in use.
Legal experts warn that companies that do not monitor regulatory developments or regularly audit their AI systems risk breaking the law, even if they act in good faith. Flexible compliance strategies and ongoing legal oversight are increasingly seen as essential as AI moves from experimentation to core business infrastructure.
The advisors’ message is clear: AI remains a powerful competitive tool, but it also poses a growing legal risk in 2026. Companies that fail to integrate governance, oversight and compliance into their AI strategy may find that the technology creates more problems than it solves.
