The UK's small businesses should plan to spend more on digital technology, according to a new report.
Research commissioned by cloud accounting platform Xero revealed that if the UK’s 1.1m micro businesses doubled their use of digital technologies it could result in a £4,050 average productivity boost for the 4.09m workers in that sector.
The report also reveals that the UK outperforms the EU average when it comes to most aspects of business digitisation. For example, 30% of UK firms make use of cloud solutions compared to the EU average of just 18%.
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If they do invest in more digital tools then small firms could stand to benefit from the potential spending boom that might take place post lockdown. The boom could be driven by £18.5bn of accumulated household savings for January alone, according to Bank of England statistics.
Digital technologies
Investing in more robust digital technologies could therefore help SMEs tap into that cash, with consumers said to be increasingly in favour of showing greater loyalty to local businesses over bigger firms.
According to the recent Future of Small Business report, which surveyed 500 SME owners and 2,000 consumers, there was a noticeable shift towards supporting smaller companies during the coronavirus pandemic.
“The advantage small firms have is public affection and being better acquainted with their customers," said Gary Turner, Xero’s Managing Director of UK and EMEA.
"The economic damage wrought by COVID-19 continues to be devastating, so it’s crucial SMEs know how to tap into this human aspect. After so long without social contact, we’ll see a resurgence in the lost art of loyalty. There may also be some old processes SMEs are happy to banish in favour of new technology to put them firmly in control of their business.”
Many micro and small businesses are already investing in their digital tools, with 26% now relying on cloud technology to help them improve efficiency. One third (31%) have ditched the use of paper invoices altogether, replacing them with digital billing and invoicing software with a further 26% removing old school paper payslips.
Meanwhile, 27% of small business owners said they were planning on investing in e-commerce tools that would allow them to increase their online sales.
“Technology has a critical role to play in helping firms get, sell and operate online, adjust to changing consumer needs, and free them up to focus on building relationships with customers,” added Turner. “As lockdown ends, closing the digital divide will be essential. That’s why we need to see the government go even further in supporting SMEs to adopt the digital tools and skills they’ll need to prosper.”
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