London, 20 June 2023: Sage, a leader in accounting, finance, HR, and payroll technology for small and mid-sized businesses (SMBs), is calling on the Government to grasp the UK’s opportunity to be an advanced digital economy and address flatlining productivity.
Sage’s Blueprint for Digital-led Growth, published today, contains policy proposals that will prevent the UK falling behind other hi-tech nations and trigger much needed investment in innovation and automation. This follows the closure of the failed Help to Grow: Digital scheme and the third delay to the next phase of the Making Tax Digital programme which has been deferred to 2027 at the earliest.
The Blueprint sets out how Government can address this to ensure small and mid-sized businesses are able to benefit from technology, such as AI to increase growth and productivity, unlock innovation and take action against climate change.
Despite resilience and optimism, rising overheads, and inflationary pressures, coupled with low cash balances, mean UK SMBs are not in a strong position to invest, holding back productivity. 92% say technology is vital to their survival, yet they plan to increase technology investment by 13%, below the European average of 18%*. The Blueprint sets out ways to put SMBs in a stronger position to address these challenges.
With a potential £232 billion** in annual gross value added (GVA) waiting to be added to the economy, through further digitalisation, Sage’s Blueprint highlights the need to underpin tech investment, with a time-limited Small Business ‘Digital Growth Fund.’ This would offer tax reliefs on investment in productivity software to help SMBs overcome financial barriers to digitalisation and stimulate the investment needed for the UK to remain competitive.
As part of its 2022-23 Budget, Australia introduced the Small Business Technology Investment Boost, aimed at increasing productivity and digital uptake of SMBs. Sage is calling on the UK Government to introduce a similar scheme to scale digital adoption needed to strengthen the economy.
Steve Hare, CEO of Sage said:
“SMBs are ready to embrace the power of technology to grow their businesses. We welcome plans for the Global Summit on AI, and encourage government to set out an ambitious and joined up approach to digitalise the economy so all UK businesses can benefit from technology.
“As the UK government strives to be a tech superpower, meet net zero targets, and enable home-grown businesses to compete internationally, it is essential SMBs are supported on this journey. Our Blueprint offers an achievable plan to help deliver this.”
Darren Jones MP, Chair of the Business and Trade Committee said:
“As technology continues to evolve rapidly, Sage’s Blueprint for Digital-led Growth reminds us of the need to empower SMBs to adopt digital tools.
“With signs of business investment beginning to slow down, the Government must act to incentivise the adoption of productivity-enhancing technology, ensuring that the UK remains competitive and accelerates economic growth.”
Read the Blueprint report.
*Source Small Business Big Opportunity report, Sage, 2023
**Source Digital Britain report, Sage, 2022
Proposed measures within the Blueprint include:
- Replacing Help to Grow: Digital with a Small Business Digital Growth Fund to incentivise investment in productivity enhancing technology.
- Following countries in Europe, Asia and South America by requiring use of internationally accepted e-invoicing standards to dramatically speed up billing and payment automation.
- Giving SMBs smarter access to their data held by third parties for example credit agencies to understand loan decisions.
- Making it much faster and simpler for SMBs to identify themselves with portable digital business IDs.
- Enabling SMBs to take climate action by simplifying ESG reporting for SMBs.
- Playing a leading role in ensuring that AI regulation does not become overly complex so SMBs can safely adopt cutting-edge technologies.
About the Digital Growth Fund
As part of its 2022-23 Budget, Australia introduced the Small Business Technology Investment Boost aimed at increasing productivity and digital uptake of SMBs. Limited to one-year, Australian SMBs can deduct 120% of the cost from digital adoption, capped at AUS $100,000.
Sage believes a scheme like Australia’s should be introduced in the UK to scale digital adoption. Through a Small Business Digital Growth Fund, SMBs could claim an additional 140% deduction (worth 10% of the purchase cost) against their corporation tax bill for qualifying productivity software. We would expect this to be capped at £50,000 per company and be time-limited to one year initially.
This type of policy would be simple for both the Government and businesses to administer, only requiring an accountant to make the relevant adjustments on a corporation tax return. We estimate a cost to HM Treasury of between £300-£350 million for the one-year period, which is the near equivalent of the £295 million that the Government budgeted for Help to Grow: Digital and on which it significantly underspent.
 Australian Government, Small Business Technology Investment Boost and Small Business Skills and Training Boost, https://www.ato.gov.au/General/New-legislation/In-detail/Direct-taxes/Income-tax-for-businesses/Small-Business-Technology-Investment-Boost-and-Small-Business-Skills-and-Training-Boost/
 Digital Kit Programme - https://espanadigital.gob.es/en/measure/digital-kit-program
About Sage Group
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.