Blog

25 February 2015

SMEs and the digital skills crisis

The House of Lords has issued a report highlighting that up to 25% of UK jobs are at risk of automation over the coming years. Titled ‘Make or Break – the UK’s Digital Future', it concluded that the country’s digital skills shortage and future technology needs need to be urgently addressed. It also suggested that small and medium sized enterprises (SMEs) are falling behind with digital technology due to a lack of awareness, skills and low finance.

We touched upon the issue of automation and technology in our blog last week, but the House of Lords has now issued a report highlighting that up to 25% of UK jobs are at risk of automation over the coming years.

The report, ‘Make or Break – the UK’s Digital Future’ was produced by the Digital Skills Committee and concluded that plans must be made to address the country’s digital skills shortage and future technology needs. It also suggested that small and medium sized enterprises (SMEs) are falling behind with digital technology due to a lack of awareness, skills and low finance.

Low awareness amongst SMEs

The report highlighted just some of the reasons businesses should embrace digital technology:

  • SMEs that make full use of the internet and e-commerce are more likely to grow and export at a faster rate and create more jobs than firms that don’t - McKinsey and Company
  • Digitally mature businesses are three times more likely to grow compared to digitally immature companies - Virgin Media.
  • If SMEs were to embrace digital technology, they could generate almost £19 billion extra in revenue.

However, many small firms still aren’t aware of the potential opportunities that digital technology can create. For example, in a survey of 1,000 Scottish SMEs, 25% said they didn’t use the internet at all and most of these non-users didn’t see how the internet was relevant to their business. Therefore, they need to be educated on how it can be used to drive sales and aid their business.

Similarly, government statistics indicate that only 30% of SMEs have a website, which is rather worrying given the fact that most customers expect businesses to have some sort of online presence. Admittedly, other studies have found the figure to be closer to 50%, but either way, this indicates that large numbers of businesses aren’t benefitting from the technology available to them.

One reason suggested for the lack of awareness is that the government is targeting the wrong type of SME. While campaigns have been run to support digital uptake, the government and media have focused on high growth start-ups and world-changing entrepreneurs rather than microbusinesses, which make up the largest proportion of the UK’s SME population.

SMEs and digital skills

Everyday activities such as video conferencing and online banking require digital skills and many tasks essential for businesses, such as tax returns, are now being moved into the digital realm. Therefore, companies and staff with low level digital skills may find that they miss out on business as a result or are less competitive in the future.

One issue is appears to be hiring staff with the skills they need. Almost a third of SMEs said this shortage of skills is hampering this success. Unfortunately, the problem is magnified by the fact that there is a shortage of staff with medium and high level digital skills within the UK as a whole.

The report suggested industry partnerships as a way to improve access to skilled staff, and specialist coaching for SMEs, including short online courses to help them get to grip with online marketing for example. 

Finance

Small businesses are by their nature more limited by capital than larger firms. This can be restrictive when looking to invest and improve in technology or skilled staff. While technology improvements pay for themselves in the long run, firms need access to finance the improvements in the first place.  

The way forward

The UK needs to be ambitious as other countries are already focusing on digital leadership, with Finland, Singapore and Sweden generally at the top of the Global Competitiveness Index. The report concluded with the recommendation that the government create a digital agenda to outline what the UK should achieve and when by. This included objectives to:

  • Ensure everyone has access to the internet
  • Improve the digital skills of the population as a whole, through schools, further education, apprenticeships and business support
  • Improve awareness of the risks of digital technology

You can read the full report here. Tweet us your thoughts on the recommendations.  

D2 Interactive