Almost all small and medium sized enterprises depend on tech for business survival says Sage

A new report launched today by accounting software company Sage, has revealed that 92 per cent of small and medium sized enterprises (SMEs) now depend on technology for business survival but concerns around costs, skills and knowledge are holding them back from going further and faster.  

Sage's Digital Britain: How Small Businesses are turning the tide on tech report published today reveals how SMEs are at a critical tech tipping point, representing a significant opportunity to boost the UK’s economy.

Sage commissioned the study, launched at a House of Commons event today, of 5,000 SMEs across the country to understand the level of digitalisation and how it is boosting UK economic growth. SMEs represents 61 per cent of UK jobs and 52 per cent of UK turnover.

The research shows that almost two thirds of SMEs are using technology to cut costs and better compete for customers. Ninety-two percent of SMEs now depend on technology for business survival but concerns around costs, skills and knowledge are delaying tech adoption.

With the right policy framework, Sage’s new report reveals the huge potential for SMEs to create a high-growth digital economy, which could unlock an extra £232 billion for the economy annually.

Sage is calling on big tech companies and government to adopt a pro-tech, pro-enterprise approach and deliver improved financial incentives to encourage greater investment in productivity-enhancing technologies, more data sharing so SMEs can innovate to develop their digital infrastructure.

Steve Hare, CEO, Sage, said: “Over the past two years, businesses have demonstrated incredible resilience against a backdrop of huge uncertainty. We know there’s been a significant shift in the adoption of technology, with 91 per cent of SMEs telling us it was vital in the creation of their business.

“Digitalisation amongst SMEs represents a significant opportunity for the UK in terms of economic contribution, job creation and the upskilling of the workforce, which cannot be overlooked. But we need to help businesses take full advantage of the strength of technology; to do this, the government must prioritise the incentives needed to encourage further investment.”

Research findings:

The top barriers for investment are cost and understanding:

• The most significant barrier is cost, with 41% concerned about adopting new tech due to cash flow pressure and 24% unsure of the return on investment
• Second is awareness, with 34% stating they are unaware of which solution is right for them
• Almost a third (30%) say that training staff on new processes and breaking habits are also a barrier

SMBs must prioritise investment in digital tools to successfully mitigate against macroeconomic challenges

• The threat of a recession, continued inflation and increased costs are [significantly] impacting SMBs
• Over 9 in 10 businesses (92%) state that technology is important to their survival and growth, and 88% say that it is key to business resilience

Data is an important area of untapped potential 

• Technology that generates data (websites, social media, accountancy, and HR software) have been widely adopted by small and medium sized business – and continue to see high levels of investment
• However, only 24% of SMBs have adopted tech to collect and use data, such as data analytics software
• Five sectors with the lowest adoption of data analytics technology are beauty and wellbeing, retail, creative industries, hospitality, and education

The pandemic prompted a fundamental perception shift across SMBs regarding digital technology

• 92% say that digital tools have been vital to their survival through the pandemic
• Of businesses founded in the past two years, 91% credited their creation to new and innovative technologies
• 8 in 10 SMBs say that technology is important to achieving their business goals. This is reflective of every sector and region in the UK
• Over 75% of businesses stated that online reputation information, such as online reviews and ratings (‘Blue Tick Tech’) is important to them

Effective action by government and policy makers could unlock an additional £232 billion in gross value add via digitalisation to the economy

• Sage and Strand Partners worked with Oxford Analytica to undertake an economic modelling study to determine the value of tech to the UK economy; this took in to account the extent to which tech enables increased sales and services to customers, reduced costs and operating expenses and internal efficiencies
• These all represent key inputs into Gross Value Added (GVA), a leading measure of the size of the economy which is used to determine GDP.

Based on the Digital Britain findings, Sage has three asks of the government and other big technology companies to help deliver a robust and dynamic digital landscape:

1. Financial Incentives: access to tax incentives and reforming Help to Grow: Digital to scale digital adoption and boost productivity. This includes:
   1. Expanding the range of technologies Help to Grow: Digital covers to include a wider range of solutions
   2. Allowing SMBs to deduct 200% of their expenditure on newly adopted productivity-enhancing technology from their tax bill
   3. Stopping the progression of the Online Sales Tax in any form

1. Data: encourage more public sector data sharing to provide useful insights for SMEs. This includes:
   1. Developing a clear plan for opening government and public sector data sets that will enable real-time insights to empower SMBs
   2. Establishing a consistent set of industry standards to enable a more trusted, efficient, and innovative data-sharing culture across business, third parties and government

Creating an AI framework that will enable all businesses to use data more freely for research purposes

1. Infrastructure: acting upon and endorsing Mobile UK’s call to fund Digital Champions for local authorities to help coordinate and prioritise digital connectivity.