Boosting SME digital skills is key for UK economic growth

The U.K.’s entrepreneurial ambitions are stronger than ever.

Despite the challenging economic times, new analysis by Mastercard and Opinium shows that the number of micro businesses (zero to nine employees) being set up in the U.K. has grown every year in the past decade.

However, the U.K.’s smallest businesses are the least optimistic about their future performance, compared with medium and large businesses.

It’s hardly surprising when energy costs, staffing shortages, supply chain blockages and liquidity concerns are so prevalent — hampering the ability of small businesses to grow and succeed. This is on top of the already challenging task of running a business and keeping pace with an ever-changing digital environment, and the impact this has on customer demand.

Schemes to address the unique challenges that small and medium-sized enterprises (SMEs) face, help them unleash productivity, and build their resiliency are a vital component of the U.K.’s innovation strategy and its economic development. SMEs, after all, represent 99.9 percent of all businesses in the U.K., employ 48% of the population, and account for around 36 percent of turnover in the U.K. private sector. Without a healthy SME ecosystem, an economy runs the risk of dwindling growth, stifling innovation and drying up its supply of experienced talent.

Many SMEs feel overwhelmed by the amount of choice when it comes to choosing digital tools, and not having the right expertise.

It’s no surprise then that the U.K. government’s Digital Strategy has a clear mandate to support businesses, particularly SMEs, to boost digital adoption in order to grow the economy as a whole.

To support this ambition and the government’s vision for long-term prosperity in the U.K., Mastercard’s Get Britain Growing policy program is bringing together innovators, think-tanks, businesses, and consumer representatives to explore the role of digital payments in growing the economy.

The latest in its series of papers, published this week, calls on policymakers to get behind the U.K.’s payments sector and promote technology that helps micro and small businesses to not only grow but thrive, by improving cash flow and access to finance, unleashing productivity and opening up access to markets outside the U.K., all in order to boost sustainable growth.

The digital readiness gap

When it comes to digital adoption, the gulf between SMEs and large enterprises is stark. According to the OECD, SMEs lag behind in digital adoption across all technology areas.

SMEs tend to digitalize general administration and marketing operations first, with the digital gap between small and large firms smaller in areas such as electronic invoicing, social media and e-commerce. However, the gap in adoption increases when technologies become more sophisticated and harder to implement.

This is concerning given the demonstrated productivity improvements for those businesses that invest in digital technologies. In fact, U.K. SMEs that use at least two business management technologies show productivity gains of around 25 percent.

The reality of digitalization for U.K. SMEs

SMEs want to adopt more digital tools, services and other emerging technologies to help them grow and flourish, but there are a number of barriers.

However, while SMEs want to adopt more digital tools, services, and other emerging technologies to help them grow and flourish, there are a number of barriers stopping them from doing so.

Many feel overwhelmed by the amount of choice when it comes to choosing digital tools, and not having the right expertise. Indeed, 32 percent of the U.K.’s small-business owners say they want to make use of digital tools but are unsure about which are most suitable for their needs, while 44 percent of U.K. SMEs think that there is too much confusing information about technology solutions. Programs to support small businesses help tackle these challenges by filling an educational gap in the U.K.’s business ecosystem.

One such program is Mastercard’s Strive UK, which acts as a one-stop shop to connect the U.K’s small businesses with the right digital technology and skills. Strive UK provides support on everything from creating a social media strategy and setting up an online shop to establishing a growth plan and accessing mentoring from industry experts. It aims to support micro and small businesses in the U.K. by providing free access to training and targeted advice for the unique business challenges they face. Since its creation in 2021, the program has supported more than a million U.K. businesses.

Focusing on minorities to unlock SME potential

Strive is particularly focused on supporting businesses run by women or those from ethnic minority backgrounds due to the pronounced barriers these businesses experience.

Female entrepreneurs represent huge economic potential for the U.K.: £250 billion of new value could be added to the U.K. economy if women started and scaled new businesses at the same rate as men. But women often face a wider range of hurdles than men when it comes to starting and growing a business, along with having felt the impact of the pandemic more acutely than their male counterparts, according to Mastercard research.

Meanwhile, further findings by Mastercard show that U.K.’s ethnic minority business leaders are more likely to be unsure about which digital tools are best for their business, as well as being more concerned regarding the safety of using digital tools. Overall, 49 percent were more likely to have concerns about the security of technology than those from other backgrounds.

To overcome these barriers, Strive UK gives SMEs access to various and, importantly, tailored forms of support through its partners. SMEs can build personalized business action plans with Enterprise Nation; connect with experts in strategy, marketing, technology and finance through Digital Boost; and, through Be the Business, access their own board of experienced business leaders and experts for 12 months, connect with a mentor and get free technology advice.

Small-business owners aren’t a homogenous group, so multiple programs with tailored support are vital for these entrepreneurs, helping them to open new markets, drive growth and provide an abundance of employment opportunities across the U.K.

SMEs are the backbone of any healthy economy. By working to support business owners and empowering them to work even more effectively, sustainably and at a bigger scale, we can build a more resilient future for us all.