Digital technologies can boost Britain’s small businesses

  • 22% of small and medium-sized enterprises still don’t use digital platforms, such as Google, Facebook and LinkedIn, in their daily operations
  • 61% of senior decision makers in British SMEs believe that technology and digital platforms have helped their business to expand
  • Half (49%) agree that digital platforms have allowed their businesses to compete more effectively against larger brands in their sector
  • 62% of SMEs said that, without digital platforms, it would have been harder for them to operate during COVID-19
  • The findings come from a new CPS report evaluating the impact of technology on Britain’s SMEs and how it can help them grow.
  • The report shows that the digital revolution has been a net positive for Britain’s SMEs, and argues that Government needs to help accelerate its take-up in order to help the ‘long tail’ of poorly performing firms

According to new research from the Centre for Policy Studies, 22% of SMEs still don’t use digital platforms, such as Google, Facebook and LinkedIn, or software for digital accounting, HR, and customer relationship management, in their daily operations.

This is despite over three-fifths (61%) of those that do agreeing that technology and digital platforms have helped their business to expand, and almost half (49%) saying it has allowed their businesses to compete more effectively against larger brands.

Reaching new audiences’ was the single main reason why SMEs use digital platforms (chosen by 29% of respondents), followed by ‘interacting with customers’ (18%), ‘handling financial data’ (15%) and ‘low-cost advertising’ (13%).

A new report by the CPS, the leading centre-right think tank, shows that technology and digital platforms have been crucial in boosting the performance and productivity of businesses. This is especially true for small and medium sized businesses (SMEs), which now account for 99.8% of all businesses in the UK. However, it warns that Britain is still not making the most of this opportunity – not least because of a failure to understand the full economic impact of the digital revolution.

The report, which will be launched today by the Minister for Small Business, Paul Scully MP, contains new polling and results of focus groups of SME owners and senior managers, carried out in the wake of the pandemic. The polling, by YouGov, shows that three-fifths (62%) of SMEs agree that without digital platforms, it would have been harder for them to operate during the pandemic, and 36 per cent now view digital platforms more favourably than before the lockdown.

Demonstrating the increased digitisation of our economy, the value of e-commerce sales in the UK non-financial sector have increased by nearly 60% since 2009, and stood at around £688 billion in 2018. Amazon claims that SMEs using its platform achieved total export sales in excess of £2 billion in 2018.

Platforms for Growth’, written by CPS Business Researcher Eamonn Ives, argues that most SMEs rightly see the digital revolution as a net positive, and that the Government needs to ensure that the ‘long tail’ of less productive firms can take full advantage of the opportunities it offers. The report, supported by Facebook, is part of the CPS’s ‘Going for Growth’ series, which explores how Government can help businesses to drive the post-Covid recovery.

It calls for an urgent review of the Apprenticeship Levy to ensure employers use funds to invest in digital training that will deliver recognised productivity benefits for their businesses. Introducing tax breaks for self-funded training would also encourage more people to improve their digital literacy skills.

To improve digital infrastructure, the report also highlights the need for flexibility around the height and width of 5G masts to increase connectivity, as well as a comprehensive new cyber security strategy to take effect after 2021 to provide reassurance for those who operate online.

CPS Business Researcher, and report author, Eamonn Ives, said:

New digital technologies should be embraced and allowed to flourish. We should be led by the evidence when it comes to their impact on Britain’s SMEs, which shows how they can bolster productivity, and will be vital for the UK’s economic recovery after lockdown.

“Our recommendations aim to ensure that digital technologies remain an overwhelming force for good in the workplace, and allow the country’s ecosystem of SMEs to grow, take on new staff, and thrive as the dynamic businesses they can be.”

Steve Hatch, VP for Northern Europe at Facebook, said:

“Technology has played a significant role in helping SMEs break down the many barriers to entry that would have existed just a decade ago. Technology has levelled the playing field and SMEs can now reach new customers and markets at a fraction of the cost enabling them to reemerge and thrive following the impact of Covid-19.

“Facebook provides 160m business globally with free tools and advertising solutions that enable them to reach new customers, grow market share and ultimately create jobs. It is clear there is much more to be done to accelerate the digital transformation of many UK SMEs and we look forward to helping them achieve their goals.”

Other recommendations include:

  • Allowing data to be included within the ambit of R&D tax credits to encourage start-ups to innovate.
  • Reforming the Digital Services Tax, suggesting instead that it should work with international partners in the OECD to come to an impartial and pro-growth conclusion on how best to ensure multinational technology firms pay their fair share.
  • Open up public data from government departments, agencies, and regulators for the private sector, charities, and academics to make use of.
  • Identifying new ways to promote investment from institutional investors.
  • Liberalising immigration rules for the brightest and best.
  • Increasing the £1,000 thresholds on the Trading Allowance and Property Allowance to encourage entrepreneurialism.
  • Reviewing how government and the ONS surveys small businesses, to ensure they accurately reflect the UK’s changing economy and allow for evidence-based policymaking.
 The report was produced independently by the Centre for Policy Studies, supported by Facebook. The CPS retained complete editorial control, and the conclusions are not necessarily representative of Facebook’s views.

Date Added: Monday 6th July 2020