Potential £145bn productivity boost for UK economy


New research published by Sage plc and Capital Economics has found that unlocking SME digital investment will be critical in helping small and medium size businesses remain resilient as a wave of local lockdowns trigger ongoing uncertainty – it could also deliver major benefits to the UK economy.

According to the research, Covid-19 has had a transformational effect on attitudes to technology among UK SMEs – 73% of them have turned to technology during the pandemic to keep their business functioning –  only 17% were planning such investment before the crisis.

  • 43% say the pandemic has made technology investment more urgent in order to remain competitive and boost productivity
  • 72% believe further investment into key areas of technology would deliver performance improvements and support recovery

This increased appetite presents an opportunity to underpin fundamental long-term productivity improvements among UK businesses.

However, Covid-19 has dramatically reduced their capacity to invest – over three-quarters say financial constraints are preventing the necessary investment in technology.

If these barriers can be overcome, and this untapped appetite for investment unlocked in fullUK SMEs could deliver major benefits to the economy, including:

  • £145 billion in annual economic output as a result of improved productivity, equivalent to:
      • 140 million working weeks per year – or 8 working weeks per employee per year
      • More than double the total estimated cost of the Job Retention Scheme
  • £325 billion additional annual revenue
  • Supporting, creating and protecting 2.7 million jobs across the UK private sector


There is widespread support among businesses for Government-backed financial incentives to accelerate technology investment, including digital vouchers, digital adoption grants and tax benefits.

Steve Hare, Sage CEO said, “As businesses across the country face the threat of tighter lockdowns, the need is to place firms on a more sustainable footing by giving them confidence and support to invest – the only certainty for SMEs right now is uncertainty – we must do everything we can to ensure firms can stand effectively on their own two feet through a challenging period.

“We are on the brink of a once-in-a-generation digital revolution among SMEs – one that will power job creation and growth at a time when it’s most needed, as well as helping to crack the UK’s long-standing productivity puzzle. But the UK stands to lose out on these massive gains if we do not encourage this investment now. Currently, businesses do not believe they can deliver even half of the technology investment they need in order to position themselves for recovery and growth.

“So, in addition to targeted and local support, SMEs in all sectors across the UK need a strong message from Government that they can invest in technology with confidence. Our research shows that policy incentives like vouchers and tax breaks would pay for themselves within a year, driving a tech-led recovery that will underpin greater resilience, productivity, and job creation for decades to come.”

Felicity Burch, CBI Director of Innovation and Digital said: “Against the Covid pandemic, UK business has demonstrated extraordinary levels of adaptability by forging new working methods and routes to market. Much of this innovation has been underpinned by an accelerated move towards new technology.

“But cash is now tight, and this will hold firms back as they seek solutions to help them grow out of the current crisis, and on to a successful future beyond Covid.

“It is clear the Government needs to step up the support available for innovation adoption. This will be vital to ensure the UK builds back better, with a more productive, sustainable and green economy in all parts of the country.”

Leave a Reply

Your e-mail address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.