Digital investment by SMEs can provide £145 billion boost to UK economy

As local lockdowns across the country trigger uncertainty within SMEs, unlocking the potential of digital investment will help to maintain resilience, according to the study from Sage and Capital Economics.

In addition to providing substantial benefit to the UK economy, investment in tech could provide £325 billion in additional revenue and support up to 2.7 million jobs, as customer and employee engagement is bolstered by digitisation.

During the Covid-19 pandemic, 73% of companies have turned to tech to keep their business functioning, although only 17% were planning investment before the crisis.

67% of SMEs, meanwhile, expressed wishes to further tech investment going forward, and nearly three-quarters (72%) believe that further investment now into key areas of technology would deliver performance improvements and support recovery.

Additionally, 43% said the pandemic has made technology investment more urgent in regards to keeping up with competition and maintaining productivity.

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However, Covid-19 has rendered budgets limited, with over three-quarters revealing that financial constraints are preventing the necessary investment in tech.

Almost nine in 10 believe that business performance would be directly benefitted by government-backed financial incentives, such as digital vouchers, digital adoption grants and tax benefits.

Analysis from Capital Economics analysis has revealed that these policies could deliver an incremental £50 billion in revenue annually, and £20 billion in economic output from improved productivity, supporting around 400,000 jobs.

On average, SMEs believe they need to invest £10,000 into technology to best position themselves for recovery and growth.

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“As businesses across the country face the threat of tighter lockdowns, the need to place firms on a more sustainable footing – by giving them confidence and support to invest – is more important than ever,” said Steve Hare, CEO of Sage. “The only certainty for SMEs right now is uncertainty, and we must do everything we can to ensure firms can stand effectively on their own two feet through a challenging period.

“We are on the brink of a once-in-a-generation digital revolution among SMEs – one that will power job creation and growth at a time when its most needed, as well as helping to finally crack the UK’s long-standing productivity puzzle. But the UK stands to lose out on these massive gains if we do not encourage this investment now. Currently, businesses do not believe they can deliver even half of the technology investment they need in order to position themselves for recovery and growth.

“So, in addition to targeted and local support, SMEs in all sectors across the UK need a strong message from Government that they can invest in technology with confidence. Our research shows that policy incentives like vouchers and tax breaks would pay for themselves within a year, driving a tech-led recovery that will underpin greater resilience, productivity, and job creation for decades to come.”

Felicity Burch, CBI director of innovation and digital, commented: “Against the Covid pandemic, UK business has demonstrated extraordinary levels of adaptability by forging new working methods and routes to market. Much of this innovation has been underpinned by an accelerated move towards new technology.

“But cash is now tight, and this will hold firms back as they now seek solutions to help them grow out of the current crisis, and on to a successful future beyond Covid. It is clear the Government needs to step up the support available for innovation adoption. This will be vital to ensure the UK builds back better, with a more productive, sustainable and green economy in all parts of the country.”

1,011 SMEs in the UK were surveyed in September 2020.