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Sage calls for SME-first AI policies to close Canada's productivity gap

New Sage research shows that digitalization is the engine of competitiveness, growth and resilience for Canadian businesses.

TORONTO (October 22, 2025) – Sage (FTSE: SGE), the leader in accounting, financial, HR, and payroll technology for small and mid-sized businesses, today released new research revealing that small businesses could hold the key to closing Canada’s long-standing productivity gap—if supported by SME-first AI and digital policies.

The report, Canada’s Digital & AI Imperative: Closing the Productivity Gap and Driving SME Growth, shows that while digital adoption is now essential to business survival and growth, uneven access to technology and skills risks creating a two-speed economy that leaves smaller firms behind.

Research Overview

Conducted in collaboration with Strand Partners, the research surveyed over 2,000 SME leaders across Canada. It found that:

  • Skills shortages are a growing concern: 41% of medium-sized firms cite a lack of internal expertise as a barrier to scaling digital adoption. 
  • Cost remains the top hurdle for small firms: 58% say affordability is the biggest barrier to digital transformation.
  • Digitalization is mission-critical: 80% of SMEs say it’s essential for growth, and 82% say it’s vital for survival. 
  • AI adoption is accelerating: 51% of SMEs already use AI, with another 18% planning to adopt it within three years. 
  • Medium-sized firms are leading the charge: They’re investing nearly twice as much in AI as small firms and reporting significantly higher productivity gains. 
  • Digital investment pays off: SMEs adopting digital tools see an average 29% productivity boost in the first year, with every dollar invested returning up to $2.40 among digital leaders.

However, regional and sectoral divides persist:

  • AI adoption rates range from 56% in Québec to just 28% in Northern Canada.
  • Sectors like finance and tech lead the way, while agriculture and construction lag.
  • Cost, skills shortages, and unclear ROI remain major barriers.

SME-First AI Policy Recommendations

“Small businesses are the backbone of our economy, yet they continue to face disproportionate challenges in navigating an increasingly complex policy and technology landscape,” said Cinzia Bazzo, Managing Director of Canada, Sage. “As AI transforms industries, well-meaning regulations can unintentionally hinder their ability to adapt and compete. To ensure inclusive growth, we must prioritize SME-first policies that empower small businesses with the clarity, flexibility, and support they need to lead in the age of AI.”

Sage is urging policymakers to place SME adoption at the heart of Canada’s AI strategy, backed by targeted skills investment and sustained support frameworks. To secure long-term prosperity and global competitiveness, Canada must close its productivity gap through inclusive AI adoption. This means empowering SMEs across all sectors and regions to lead confidently in the digital economy, while ensuring alignment with evolving global standards.

To address the most pressing barriers, Sage recommends the following policy actions:

  1. Embed SME adoption at the core of national AI strategy
  2. Equip SMEs with practical AI skills and confidence
  3. Unlock AI investment through targeted tax breaks and grants
  4. Deliver trusted, context-specific guidance for SMEs
  5. Foster a whole-of-ecosystem approach, uniting federal and provincial governments, industry, academia, and community partners
  6. Accelerate e-invoicing and structured data adoption

Closing Canada’s productivity gap demands inclusive action. Sage urges policymakers to adopt SME-first AI policies grounded in the lived experience of small business leaders. By investing in access, skills, and infrastructure—and aligning globally—Canada can unlock the full potential of its entrepreneurial economy. These priorities reflect the realities of Canadian entrepreneurs and chart a path to inclusive, innovation-led growth. As we mark Small Business Month, Sage calls on all stakeholders to champion a digital economy where small businesses lead.

About Sage

Sage exists to knock down barriers so everyone can thrive, starting with the millions of Small and Mid Sized Businesses served by us, our partners and accountants. Customers trust our finance, HR and payroll software to make work and money flow. By digitising business processes and relationships with customers, suppliers, employees, banks and governments, our digital network connects SMBs, removing friction and delivering insights. Knocking down barriers also means we use our time, technology and experience to tackle digital inequality, economic inequality and the climate crisis. 

Media contact: 

Brittany Farquhar, Corporate Affairs Manager, North America
[email protected]

Notes to editors

Sage commissioned Strand Partners to conduct an online survey was conducted between 8–15 September 2025. The study explored AI and advanced digital tool adoption, impact, barriers, and support needs among Canadian SMEs. A total of 2,012 senior business decision-makers - owners, founders, executives, and directors - from Canada-based firms with 1–499 employees (ISED SME definition) took part. Fieldwork was conducted in English and French, with results weighted to be nationally representative by province, firm size, and sector. Strand Partners is a member of the British Polling Council and abides by the rules of the Market Research Society.