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techUK is calling for an SME Digital Skills Tax Credit to boost productivity after the Prime Minister outlined a vision for a high wage, high skill, high productivity economy in his speech at the Conservative Party Conference.

SMEs across the country are at risk of being left behind unless they have access to the digital skills they need to transform their businesses. With a tightening labour market, techUK believes many SMEs will struggle to recruit the talent they need and with rising wage costs, many will say that investing in training is a luxury they can’t afford.

The Chancellor should act now to ensure that SMEs don’t lose out from a lack of digital skills, and instead enable SMEs to become a positive force for change in the skills revolution the country needs. Businesses should be supported to invest in upskilling and retraining their employees.

techUK calls on the Chancellor to build on the Help to Grow scheme and launch a Digital Skills Tax Credit. This would incentivise companies to invest in human capital in the same way that companies invest in physical capital.

The Digital Skills Tax credit is one of seven recommendations set out in techUK’s Fast Forward to Digital Jobs report.

• The digitisation of businesses across the economy is an important and proven driver of productivity, growth, and resilience. This is especially true for digitally savvy SMEs that can grow up to eight times faster than their least digitally enabled peers.
• The key to unlocking this productivity growth is access to digital skills. Without digital skills and the productivity that the application of digital technologies enables, rising wage costs risk creating inflationary pressure which will have a disproportionate impact on SMEs.
• As it stands, the UK risks falling behind in the digital skills race. Demand for digital skills in the UK is soaring – in 2020 the number of tech job vacancies in the UK outweighed our European peers by more than 250%. This is a major challenge; 77% of SME leaders said a lack of necessary skills is stopping them from applying productivity-enhancing technologies. Other obstacles for SMEs including a lack of information about what training is available, affordability, and accessing training specific to their needs.
• Studies show that SMEs face a number of obstacles to investing in their workforce, including a lack of information about what training is available, access to economies of scale (smaller employers typically pay three times more per member of staff than larger firms for formal training) and accessing training that is flexible and specific to their needs.

Antony Walker, Deputy CEO, techUK, recently said:

“UK SMEs risk becoming the victims of a digital skills gap without the support of a Digital Skills Tax Credit.

“Driving up wages without driving up productivity through digital skills is a recipe for high inflation. Many SMEs faced with a rising wage bill will feel they have less room to invest in skills when those skills are most needed. The only sustainable route to the Prime Minister’s vision towards a high wage, high skill, high productivity economy is through a rapid upskilling of the UK workforce. A Digital Skills Tax Credit targeted at SMEs would turn a skills crunch into a skills opportunity – boosting productivity and growth. 

“Demand for digital skills is growing across the economy. The lack of digital skills in the UK has led to intensifying competition for talent and upwards pressure on tech salaries. Without help, SMEs will find it increasingly difficult to compete with big businesses for digital talent, making them less competitive at a time when employment costs are going up.

“The Chancellor must help SMEs to boost their productivity through a Digital Skills Tax Credit. This would help SMEs invest in their own skills base at a time when wage costs are going up.”