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SMEs are ready for digital transformation, but face cash constraints

Research by techUK member Sage shows SMEs believe new tech can boost profitability, but they are struggling to invest.

Small and medium-sized enterprises (SMEs) are ready to transform their businesses using new technologies but are struggling to invest due to severe cash constraints, new research from techUK member Sage has found.

The research commissioned by Sage and carried out by Capital Economics underscores the economic benefits of helping SMEs adopt digital technologies.

The research found that if SMEs were able to widely adopt digital technologies, an additional £145 billion in economic output as a result of productivity increases would be gained, along with £325 billion in additional SME revenue, and support for 2.7 million jobs across the United Kingdom (UK).

The research also showed that SMEs are ready to begin their digital transformations after 73% of businesses turned to technology during the pandemic to keep their business functioning.

Over two-thirds (67%) of SMEs want to invest further in technology, nearly half (43%) of businesses say the pandemic has made technology investment more urgent in order to remain competitive and boost productivity, and nearly three-quarters (72%) believe that further investment would deliver performance improvements and support their recovery.

However, despite this desire to invest, many SMEs are facing serious cash constraints as they battle the impacts of the pandemic. Over three-quarters say they are unable to deliver the necessary investment in technology due to financial constraints, primarily driven by COVID-19.

On average, SMEs believe they need to invest around £10,000 into technology to best position themselves for recovery and growth. Micro-businesses (<10 employees) believe they need to invest £5,000 – 9,000 on average, and larger SMEs (>10 employees) are most likely to need to invest upwards of £10,000.

Respondents to the survey said that if they were able to invest the total amount, over the next six months they would have an average 15% increase in monthly revenue and 14% increase in monthly profits.

The new research findings released by Sage provides further evidence of the benefits of digital adoption by firms of all sizes, clearly demonstrating the economic potential of digital technologies and reinforcing the lessons learned during the pandemic that has shown how more digitally adept firms have been more resilient against the economic impacts of COVID-19.

While we look forward to the day that the coronavirus is defeated, new waves of infection across Europe make it clear that we will be living with the virus and its effects for some time yet.

This means that we must support businesses to adapt to a socially distanced economy in the medium-term. However, this adaptation will also have further benefits by preparing businesses to take advantage of changing consumer habits that are likely to continue even after the pandemic is over.

Already, we are seeing these new trends emerging, for example, in the early stages of the pandemic, online grocery shopping doubled its market share, digital-only banking saw a 165% increase, and the proportion of retail sales made online increased by one-third between January and July 2020.

In order to build resilience as we continue to battle COVID-19 but also to be prepared to embrace a structurally different economy in the aftermath, we must reorientate our existing business support to help businesses, and in particular SMEs, to adopt innovation and productivity-boosting technologies.

techUK has called on the government to support businesses by providing financial incentives and support to SMEs to adopt digital technologies.

In the November Spending Review the government has an opportunity to put this support in place to build a better future based around a resilient productive economy that supports sustainable livelihoods.

Sage’s press release can be read in full here.


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