Tech startups have asked to create a digital adoption fund to assist small firms in making the transition to digital technology.
Adopting digital technology has long been critical for the UK’s abysmal productivity levels to improve.
One in every three small businesses – those with fewer than 250 employees – cites cost as the primary impediment to adopting digital technology, whether video conferencing software like Teams or Zoom, customer relationship management software like Salesforce, or enterprise resource planning software like Oracle Netsuite.
Additionally, see our guide to the best small company accounting software in the United Kingdom for 2020.
The digital adoption fund would be modelled after Singapore’s “SMEs Go Digital” scheme, which provides subsidies to cover more than two-thirds of small enterprises’ digital technology expenditures. The planned UK version of the programme would pay 70% of upgrading, up to a maximum of £22,500 per business.
According to the Coalition for a Digital Economy (Coadec) research, such a fund would help reduce the gap between the most productive major enterprises in the UK and the long tail of unproductive SMEs.
If SMEs achieved the same level of productivity as their bigger peers, GDP would increase by £92 billion.
And if the UK’s 1.1 million micro-businesses — those with less than ten workers – followed suit, the result would be a £16.6 billion productivity gain.
Additionally, Codec recommends that the government publish a list of pre-approved digital tools for each company sector – from accounting to wholesaling – outlining which technology is suggested for each.
Local Enterprise Partnerships (LEPs) might serve as a link between tech start-ups and enterprises interested in learning about the advantages of digital adoption. “Necessary avenues of communication are absent,” the study said.
Finally, the Covid debacle dramatically altered how organisations see technology. The report’s authors argue that the government must initiate a post-Covid rethink of digital adoption by talking with tech start-ups, small and medium-sized businesses, and experts.
Why is productivity critical?
Historically, the UK’s labour productivity has increased at roughly 2% per year but has stalled since 2008. Indeed, the latest ONS figures show that worker productivity declined by 0.4% between January and March 2020, compared to the same period in 2019. Covid’s planned productivity levels have been lowered by 25%. This translates into an average pay cut of £5,000 per worker in economic terms.
By comparison, the typical French worker creates more by the end of a Thursday than their British equivalent does throughout the week.
And the long tail of low productivity accounts for 75% of UK enterprises, with the majority of them located in SMEs and places outside London.
This is particularly troubling considering that SMEs employ 61% of the workforce and produce 52% of revenue.