Why aren’t UK SMEs making the most of digital technologies?

The evidence is clear: using digital technology to its full potential can make your business much more productive and profitable.  

The Digital Adoption: Rapid Evidence Review (2024), which was commissioned by the Department for Business and Trade (DBT), found that using cloud computing, CRM (customer relationship management) or ERP (enterprise resource planning) software can boost an SME’s productivity by as much as 7%–18% per technology.  

That’s an incredible increase, one that is affordable and achievable. It could also make a big difference to every SME’s bottom line – so why are so many small businesses failing to make the most of digital technology? 

UK SMEs lagging behind 

The DBT’s SME Digital Adoption Taskforce: final report (2025) found that despite the UK’s world-class tech sector, UK SMEs lag behind those in other G7 countries when it comes to uptake of mass digital technologies, tools and AI. They have lower digital adoption rates than those in Germany, the USA, South Korea and elsewhere.  

Moreover, the DTB review found that UK SMEs trail larger UK businesses, which are more ready, willing and able to embrace technology and exploit it to its full potential. So, what key challenges do UK SMEs face regarding technology adoption? 

SME barriers to adoption 

Cost is always a key consideration, of course, especially when UK businesses are having to pay much more for most things. Research suggests that many business owners (especially those with fewer than 10 employees) are frequently put off by the perceived upfront costs of adopting new digital technology, with many unclear about the return on investment it can bring.  

Resistance to change is also a factor, with some SME leaders preferring to stick with their existing systems, despite knowing that better options exist. Interestingly, SMEs are more open to change when key decision-makers within the business have been in their role for a shorter time.  

Time and cost savings 

Adopting new digital technologies can be cheaper than some SME leaders imagine, while the often immediate, productivity-boosting, cost-saving results can bring a considerable return on investment.  

SME leaders are notoriously time-poor. They usually have more than enough on their plates, without having to worry about the additional demands of adopting a new technology, which some see as an unnecessary extra hassle. But, in truth, adopting new technology can be simple enough and save them and their people lots of time. 

Supporting UK SMEs 

Many UK small-business owners are not fully aware of the significant productivity gains digital solutions can deliver. Lack of digital skills and know-how can be another barrier to technology adoption. And many SME leaders are highly risk averse, while some aren’t as digitally literate as others. As a result, they can lack confidence in their own ability to choose and implement digital solutions successfully.  

There are 5.7m SMEs in the UK, making up 99.8% of the total UK business population. They employ 16.6m people (60% of the total UK workforce) and generate £2.8 trillion of annual turnover (52% of the total). Quite rightly, they are referred to as the engine of the UK economy. Even a 1% productivity uplift across UK SMEs could add £94bn a year to UK GDP. That’s a huge amount of money. 

Classic win-win 

Quite clearly, many UK SMEs need targeted support, so they can make far better use of digital tools, such as CRM systems, ERP software, e-commerce, accounting software and other potentially game-changing solutions. Not only could it have a significant impact on their success and longevity, but it could also benefit the UK economy massively. It’s a classic win-win – one that we all should support.  

Tech Adoption for Growth is a new, government-funded pilot programme offering free, practical digital support to help SMEs and sole traders get more value from digital tools. Eligible businesses are assessed and then randomly allocated to receive either one-to-one expert support or the opportunity to take part in expert-led workshops. To apply click here.