Investment in technology will be critical to helping SMBs weather the economic storm
The past few years have undoubtedly been a challenging time for small businesses. In the face of supply chain issues, political instability, and a global pandemic, they have done well to weather the storm. 2023 looks set to be another challenging year, with growth in GDP projected at -0.4%, according to the latest Confederation of British Industry report.
It’s no surprise, therefore, that the need to support SMBs with skills, funding, resources, and world-class tech infrastructure is climbing up the political agenda. In fact, last month Labour announced that they would seek to establish a state-backed group to boost small businesses by linking up institutional investors and venture capital firms, to improve conditions for SMBs and in turn, the UK’s economic fortunes.
Here’s some ways, SMBs need our support to digitise:
Plugging the gap using technology
Technology should be seen as a critical investment for small business growth, even during a downturn. Despite the challenges of the pandemic and ongoing economic turbulence, 91% of SMBs founded in the last two years did so through the use of tech. Moreover, when small businesses use technology, it delivers tangible economic benefits; currently at a rate of £216 billion to the UK economy. So it is encouraging to see Labour championing the role technology plays as a catalyst for innovation and long-term growth.
As we begin a New Year, we must not be complacent, and we know there are still challenges facing SMBs which prevent them from leveraging the full potential of technology. These include limited cash to invest in digitalisation, a lack of time to explore products and fully utilise functionality and having the right expertise to identify solutions. Knocking down these barriers has the potential to unlock billions of pounds for the UK economy.
The biggest barrier for any SMB is often having the available finance, particularly when it comes to investing in new technology. We know by working with our customers and talented home-grown start-ups how access to capital is fundamental to helping these businesses grow.
We were therefore disappointed to see the end of Help to Grow: Digital, which was seen as a real step forward in incentivising and helping SMEs with the cost of adopting technology to be more productive and grow. It’s important that the government doesn’t lose sight of the importance of incentivising SMEs to digitalise, which could easily be done through the tax system by allowing deductions on productivity enhancing technology. Our research shows that if all SMEs in the UK digitalised in-line with the top 20 per cent, an extra £232bn per annum could be unlocked for the UK economy, underlining the importance of Digital Britain.
In 2023, open data and AI should be a key focus of the government’s digital agenda. They need to accelerate the roll out of more smart data initiatives to extend beyond Open Banking to Open Finance, driving innovation and productivity increases across the country. The potential benefits of smart data for businesses create entirely new fields, for example, utilities data on energy use could allow small businesses to better understand their carbon footprint. Through our latest acquisition, Sage customers will soon to be able to measure their carbon footprint by using Sage Earth – a software which takes accounting data and estimates CO2 emissions. However, if we were able to access utilities data and combine it with our accounting data, such as actual energy usage, rather than just spend, SMEs would have a more accurate picture of their environmental impact and take targeted action.
Infrastructure and digital skills
Infrastructure is another critical barrier preventing SMBs from taking full advantage of technology. Ensuring the government keeps their promise on 5G and delivers on its ambitions to address digital exclusion as part of its Levelling Up agenda, will be key.
We need to have a compelling digital skills agenda to support a strong pipeline of talent in this country. Whether you want to start your own business or play a role in one, digital skills are essential to business success. It’s critical to inspire and support more young people to develop STEM skills, whether this is via an apprenticeship programme or via partnerships, such as the longstanding one Sage has had with the Institute of Engineering and Technology.
In a year which is likely to bring new challenges for SMBs, it is critical the government gets behind them and assesses their plan for investment in technology. While it may be tempting to scale back budgets and stall schemes to reduce spending, to stand a chance at economic recovery, SMB growth must be the priority.