April 22, 2022

UNDERSTANDABLY, many small businesses see technology as a necessary evil and a sunk cost. Pressures arising from the pandemic, compounded by Brexit and again by war in Ukraine, have done little to encourage SMEs to embrace new aspects of the digital world. Strapped for cash, they may not see investing in this area as mission-critical, particularly if their primary aim at the moment is to survive.

Two areas, however, can’t be ignored: digitalisation to generate more revenue; and, just as important, business protection.

Recent research backs up both these imperatives.  A study of more than 1,000 UK SMEs this month from IONOS, one of Europe’s largest cloud and hosting services providers, has found that just under two-thirds (63%) of SMEs find digitalisation useful for revenue growth, and nearly three-quarters (70%) of those asked find it useful for winning new customers.

While the study shows that these businesses are a little less tech-shy than some of their counterparts in France, Germany and Spain, more than 40% still cite time and cost as barriers to digitalisation beyond a basic website, email with their own domain and use of social media for marketing. However, those who were quick to establish e-commerce and online shopping capabilities for goods and services during the pandemic have preserved and even grown revenues.

Business protection has to move up the SME agenda, given the sharp increase in cyber attacks experienced by smaller businesses since the pandemic, whereas these were previously limited to mainly larger enterprises. Telecom giant BT surveyed a similar number of UK businesses  and concluded that thousands of the UK’s smallest firms could be leaving themselves open to cyber-attack because they have few or no business-grade cyber security measures in place. Essentially, they are still relying on security products which are not designed for business use. The UK Government’s Cyber Security Breaches survey found that almost half of all UK small businesses suffered a cyber security breach or attack last year.

Yet BT found  that (51%) of the micro business sector, which makes up the bulk of the UK’s 5.5 million SMEs, doesn’t have the right level of cyber protection in place and is relying on security products which are designed to protect consumers rather than businesses. The research also found 4% of SME businesses aren’t using any cyber protection at all, with this figure being even higher (17%) for micro businesses, i.e. those with 1-5 employees.

Capital allowances are available for SMEs minded to invest. While HMRC has viewed most website costs as non-tax deductible, on the basis that they are akin to a ‘business window’ which, in itself, does not have a business function, computer equipment and software do, however qualify.

SMEs wishing to explore how best to fund digital investment and harness its full potential are welcome to contact Buchler Phillips for a no-obligation discussion about suitable next steps.

Buchler Phillips is the UK’s leading independent corporate recovery, restructuring and turnaround firm.

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