Sage and techUK take the lead in driving the digital transformation of SMEs

A coalition of influential technology companies, think tanks, and industry leaders has united in advance of the Autumn Statement, appealing to the UK Government for substantial support for investments in digitalization.

In a collective industry communication, they are advocating for the introduction of enhanced tax incentives to promote spending on digital services. This move is seen as a potential driver of innovation and increased productivity across the UK’s business landscape.

The primary objective of this proposal is to empower small and medium-sized enterprises (SMEs) to embrace digitalization and harness emerging technologies, including Artificial Intelligence (AI), to boost productivity and ensure sustainable growth.

The letter, endorsed by organizations such as the national trade body techUK, the software giant Sage, the North East Chambers of Commerce, and Scotland IS, recommends a raised tax deduction of 140% on the first £50,000 spent on productivity-boosting digital services. This represents a 40% increase over standard business expenditure and caps at a maximum tax deduction of £17,500.

The UK’s digital economy is a significant contributor to the nation’s finances, with a staggering £392.9 billion generated in 2020. However, the UK still lags behind global counterparts in the adoption and application of digital technologies. Research conducted by Be the Business reveals that the UK invests less in technology compared to its G7 peers, despite 92% of SMEs considering technology crucial for their survival.

Economic modeling conducted by Sage has shown that SMEs fully embracing technology could contribute an additional £232 billion annually to the UK economy. The proposed intervention would provide a much-needed boost during a period when accelerating growth and business productivity are vital, particularly in the fight against inflation and to prevent the UK from falling behind other high-tech nations.

The letter strongly encourages the UK Government to send a clear signal to the tech sector by supporting SMEs and reinforcing tech investment through a straightforward digital adoption incentive scheme.

Julian David, CEO of techUK, said: “SMEs are the backbone of the UK economy and need to get the right support to grow and scale. A coordinated effort to bolster digital services will not only empower SMEs but also propel the UK into a future where innovation, growth, and competitiveness are secured.

“The digital economy is the cornerstone of growth, promising to deliver a new generation of enterprises, tech startups, and innovation. This is an opportunity for the UK to regain momentum in tech adoption, essential for driving further investment.”

Steve Hare, CEO of Sage, added: “The UK Government wants Britain to be a tech superpower, enabling home-grown businesses to compete internationally. For this to happen, it’s crucial SMBs are supported on this journey.

“Other nations have implemented policies that reinforce their digital infrastructure. It is time the UK not only follows suit, but aims to lead, by elevating financial incentives for SMBs when it comes to digital services.

“This will empower small and mid-sized business owners to become more productive and grow sustainably.”