How we stand to lose out on £145 billion in improved productivity and £325 billion additional SME revenue annually
27 OCT 2020
‘Necessity is the mother of invention’, or so the saying goes. In the case of Covid and the millions of small and medium businesses it has impacted it’s also been the mother of reinvention.
In our conversations with customers in recent months, the thing that has stood out most is their grit and ingenuity to adapt and survive in this difficult time. This matters to us all – small and medium-sized businesses (SMEs) will be vital to our economic recovery: they account for 60% of total employment in the UK private sector; and they created 73% of all jobs following the financial crisis in 2010. As local lockdowns trigger a new wave of uncertainty for SMEs, we must support them through this difficult period if they are to do the same again.
While targeted support for businesses subject to lockdown restrictions is the right thing to do, we must not underestimate the importance of supporting our SMEs to build in long term adaptation and resilience into their business.
Technology adoption has been key in helping SMEs flex and adapt. Before the pandemic, a fifth of SMEs said their processes had been fully digitised and only half said that investing in technology was a priority. But within the last six months, 73% of businesses have adopted new technology.
Today, Sage published the results of in-depth research we conducted into SME attitudes to digital investment. The findings are staggering. If SMEs could invest what they believe they need in technology today it could generate up to £325 billion in additional revenue every year, £145 billion in economic output as a result of improved productivity, and support 2.7 million jobs across the UK. 71% of SMEs agree that technology will increase their profitability and the increased availability of consumer-style cloud-based solutions has left most feeling well equipped to navigate new solutions.
Sage customer DPR Motorsport is a shining example of this agility and innovation. Based in Surrey, technology has proved a lifeline – both during the crisis and looking to the future. As part of its race weekend activities, the company had already invested in technology to provide remote working for access to its workshop and Sage accounting systems. The March lockdown was addressed by deploying this technology on a continuous basis. However, the pause to all on-track activities brought the business to a standstill. So, it invested in technology to reduce dependency on physical services through developing virtual motorsport. This strategy has enabled the business to survive, boosted resilience and prepared it for efficient, future growth.
But, the pandemic has dramatically reduced businesses’ capacity to invest in the future – with over 51% of businesses saying that financial constraints are preventing the investment in technology they want to make. In other words, only 40% of the value SMEs want to invest will be realised without intervention.
With a difficult winter of local and national lockdowns ahead, we are at a critical point. SMEs support countless passions, livelihoods and families across the UK, and are integral to our country’s economic survival and recovery. I believe they can be the catalyst to our recovery, but only if we support them. At Sage, we are committed to doing just that, with free trials for businesses that want to sample new solutions, providing guidance on how businesses can use technology to support them during the recent challenges, and our recent Job Retention Scheme module within our software to make furlough applications less complex - all with the aim of supporting SMEs through this difficult period and simultaneously driving the digital agenda forward in small businesses.
I would urge the Government to signal support for investing in productivity enhancing solutions. 9 in 10 SMEs believe policy measures like tax incentives, digital vouchers or grants – if delivered promptly – would directly benefit their business performance. These measures could deliver a tech-led recovery that will underpin greater resilience and job creation for decades to come.
After years of lagging productivity and limited digital appetite among UK businesses, this could be the key to finally unlock the UK’s long-standing productivity puzzle. A once-in-a-generation opportunity to drive a digital revolution among SMEs sits in front of us and it is heartening to see other key voices like the CBI, techUK and Be the Business get behind this message too. If we get this right, it will bring benefits for generations and help us navigate what is sure to be a rocky year ahead. The time to act is now.