The UK’s smallest companies have the potential to generate an impressive £77.3 billion in additional revenue and create 885,000 new jobs if they embrace digitalization at the same pace as the top 20% of tech adopters, according to a recent study by Xero, a global small business platform, and economics consultant Cebr.
The research, called Xero’s Beating the ‘Digital Drag’ report, reveals that small and medium-sized enterprises (SMEs) that have embraced digitalization have experienced a growth in revenue of 8.1% over the last four years. In contrast, SMEs that have been slow to adopt technology have seen their revenues decline by 4.7%. The study also highlights that the key benefits of adopting tech include improved customer experience, streamlined operations, and expanded client bases.
The study surveyed 684 of the UK’s smallest businesses, defined as those with up to nine employees. These businesses contribute a substantial £934.8 billion to private sector turnover, accounting for 15.3% of the total UK turnover, and represent 94.8% of all companies in the country. They also provide over a quarter of the nation’s jobs, with every £1 they make creating an additional 59p for the wider economy.
Despite their crucial economic role, the study reveals that many of these small businesses are lagging behind larger SMEs in terms of digitalization. In particular, businesses with 10-249 employees were found to have embraced digital tools at almost twice the rate of the UK’s smallest companies, using an average of eight technologies compared to 4.7. Additionally, while the pandemic prompted increased online adoption among many businesses, less than a third (30%) of the smallest companies have increased their use of digital tools since 2019, in contrast to 69% of larger SMEs. Moreover, only 41% of the UK’s smallest businesses reported using emerging technologies such as AI and digital assistants, compared to 77% of larger SMEs.
The study indicates that a lack of understanding about the benefits of digitalization is holding back small businesses, with 40% stating that they fail to see how new technologies are relevant to their company. Similarly, 39% believe that adopting more technology will not deliver value for money.
To support small businesses in thriving and selecting the right technologies for their organizations, Xero has provided some recommendations. These include the need for small businesses to seek advice from technology experts and peers, invest in training to build digital skills within their workforce, and take advantage of government support programs that foster digitalization.
By embracing digitalization and adopting the right technologies, the UK’s smallest businesses have the potential to significantly boost their revenue, create jobs, and contribute even more to the country’s economy. It is crucial for these businesses to overcome their hesitations, seek guidance, and embrace the digital revolution to secure their future success.
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