New research reveals that UK micro businesses could unlock a massive £16.6 billion boost to the economy by adopting more digital technologies. This finding comes from the largest-ever study of Britain’s smallest businesses, conducted by the Enterprise Research Centre (ERC). According to the research, if these businesses doubled their use of digital technology, they could unleash unprecedented levels of productivity, benefiting the entire UK economy.
The study challenges the perception that micro businesses are a “drag” on the UK’s productivity. Instead, it suggests that these businesses have huge untapped potential that can be unlocked by embracing digital tools. The findings are so significant that they could reshape how policymakers and business groups communicate the benefits of digital adoption to both startups and established firms.
The Five Key Technologies Driving Productivity
Researchers identified five specific technologies that can make a real difference in boosting micro business productivity:
- Cloud Computing
Adopting cloud-based computing can lead to a 13.5% increase in sales per employee after three or more years. This is a significant jump in productivity for small firms. - Customer Relationship Management (CRM) Software
The use of CRM software can result in an 18.4% increase in sales per employee over three years. This technology helps businesses streamline their customer interactions and improve overall efficiency. - E-commerce
Embracing e-commerce platforms can increase sales per employee by 7.5% over three years, opening up new revenue streams and market opportunities for small businesses. - Online Accounting Software
Web-based accounting software is another key player, offering a 11.8% boost in sales per employee over three years. This tool simplifies financial management and helps businesses stay on top of their finances. - Computer-Aided Design (CAD)
CAD technology leads to a 7.1% increase in sales per employee, which can be especially valuable for design-focused micro businesses.
Growing Adoption of Digital Tools Among Micro Businesses
The use of digital technology has been growing rapidly among UK micro businesses in recent years. For example, the adoption of cloud computing increased from 9% in 2012 to 43% in 2018, while the use of web-based accounting software grew from 15% to 42% over the same period. This shift shows that more small businesses are beginning to embrace the digital age, but there’s still a lot of room for growth.
However, the study also found that about 25% of micro business owners are not using any digital technologies at all, and another 25% are only using one of the five technologies identified in the study. This highlights a major opportunity for these businesses to increase their productivity by adopting more digital tools.
Insights from the Research
Stephen Roper, the director of the Enterprise Research Centre, emphasized that this study provides the first solid evidence of the positive impact that digital adoption can have on the productivity of micro businesses in the UK. “There’s a clear digital dividend for the productivity of our smallest firms from adopting certain technologies, and these effects increase with the number of technologies used,” Roper explained.
He went on to highlight how essential micro businesses are to our daily lives. “They are our plumbers, builders, hairdressers, mechanics, architects, designers, artisans, lawyers, and accountants,” he said. By using the evidence from the study, policymakers can better support these businesses, helping them to raise their productivity and, in turn, contribute more to the prosperity of the UK economy.
FAQs
Q1: What is the £16.6 billion digital dividend?
The £16.6 billion digital dividend refers to the potential boost to the UK economy that could come from increased digital technology adoption among micro businesses. If these businesses adopted more digital tools, it could significantly raise their productivity and contribute to the economy.
Q2: What five technologies were identified as key drivers of productivity?
The five key technologies are:
- Cloud-based computing
- Customer Relationship Management (CRM) software
- E-commerce platforms
- Online accounting software
- Computer-Aided Design (CAD)
Q3: How much productivity boost can businesses expect from adopting these technologies?
The study found that each of these technologies could lead to increased sales per employee, with cloud computing leading to a 13.5% boost, CRM software offering an 18.4% increase, and e-commerce bringing a 7.5% improvement. Online accounting software and CAD technology also showed significant productivity gains.
Q4: How many UK micro businesses are currently using digital technologies?
The study revealed that 25% of micro businesses in the UK are not using any digital technologies, while another 25% are only using one of the identified technologies. This suggests there is still a significant opportunity for growth in digital adoption.
Q5: What can policymakers do to support micro businesses in adopting digital technologies?
Policymakers can use the findings from this study to help raise awareness about the benefits of digital adoption. By providing clear evidence of how technology can improve productivity, they can encourage more micro businesses to embrace these tools and support them in their digital transformation journey.
Conclusion
The research highlights an exciting opportunity for UK micro businesses to boost their productivity and contribute more to the economy by adopting digital technologies. With clear evidence showing the benefits of tools like cloud computing, CRM software, and e-commerce, it’s time for policymakers to step up and help small businesses take full advantage of the digital age. By doing so, we can expect to see a significant improvement in the productivity and prosperity of the UK as a whole.