According to new research from Xero, SMBs are lagging behind larger companies and enterprises when it comes to their digital revolutions, which could be costing the British economy alone up to £77.3 billion in lost revenue.
The study noted that small businesses with up to nine employees account for almost 95% of all UK companies, yet they only contribute around 15% of the UK’s total turnover.
Currently accounting for 8.9 million jobs, Xero reckons better digitalization could bring 885,000 more jobs to the British economy.
SMBs need to digitalize more quickly
With a broad look at the past four years, Xero’s study found that the SMBs that digitalized the most had increased their revenue by 8.1%, compared with a 4.7% decline for the slowest adopters.
The pandemic is credited with pushing many SMBs online, however only one-third (30%) of those questioned have increased their use of digital tools since 2019, indicating that the shift is seen as one of necessity rather than a beneficial one.
A similar trend is true of AI adoption, whereby larger companies appear to be more willing to get on board with the technology.
Around two in five struggle to see the relevance of new technologies to their company (40%) and the value for money relating to adopting more tech (39%).
Referring to SMBs as the “nation’s army of tiny firms” that “pack[s] a punch,” Xero’s UK Managing Director, Alex von Schirmeister, said that they each have unique priorities and treating them as a ‘catch-all’ group is not a solution.
Looking ahead, Xero suggests that SMBs navigate this “digital drag” by setting clear expectations and prioritizing the right solutions. It’s about balancing the costs with potential benefits and adapting as priorities and solutions change.
