- Research commissioned by The Coalition for a Digital Economy (Coadec) shows that the Government’s attempt to boost the productivity of small businesses lacks the necessary ambition to claw back some of the £92 billion worth of productivity gains up for grabs.
- Report shows that 95% of SMEs will be locked out from accessing the Help to Grow Digital scheme in its current form. Lowering the eligibility criteria to include businesses with 2-249 employees, would result in a £66m GVA boost.
- The scheme is also limited to just three types of software: Customer Relationship Management (CRM), e-commerce and accountancy software. But if a wider range of software was made available it would deliver an additional £1.9bn in GVA.
- An expansion of the software available and a reduction to the employee threshold would generate a huge £2.95bn in GVA.
- Coadec’s analysis of 12 Red Wall seats won by the Conservatives in 2019 shows an average £3.5m increase per constituency if eligibility and software criteria were expanded. The most recent addition, Hartlepool, would benefit from an additional £2.6m in GVA, with significant spill-over benefits to the local economy.
DOWNLOAD THE REPORT HERE.
The Coalition for a Digital Economy (Coadec), the independent advocacy group that serves as the policy voice for Britain’s technology-led startups and scaleups, has launched new research that shows that the Government needs to make the Help to Grow Digital scheme more ambitious if it hopes to bounce-back better from the pandemic-induced recession.
The Chancellor announced the Help to Grow Digital scheme at the Budget in March in an effort to boost the sluggish productivity rates of British small businesses (SMEs). It will launch in Autumn and allow eligible businesses to gain access to a discount of up to 50% on the costs of approved software, worth up to £5,000. This followed Coadec’s research last year which showed that cost was one of the biggest barriers for SMEs to invest in productivity-enhancing software.
But due the Help to Grow Digital scheme’s design, it will fall well short of its potential to claw back some of the £92 billion worth of productivity gains up for grabs. At the moment it is only open to businesses with between 5 and 249 employees. This excludes 95% of small businesses in the UK even though microbusinesses with 2 to 5 employees represent the bulk of the longtail and are in the most need of help.
Alongside unnecessarily restrictive eligibility, the scheme is currently limited to just three types of software: Customer Relationship Management (CRM), e-commerce and accountancy software. This means it won’t benefit some of the worst-hit sectors from the pandemic like retail and hospitality, where rostering, HR, point-of-sale, and stock management solutions will have the most impact. It is vital that this list is expanded to maximise the scheme’s benefits.
The new report, including economic impact analysis, has five recommendations for the Government to boost digital adoption and productivity, including:
Widen the scope of eligible companies, notable lines coming out of the research include:
- The scheme only includes companies with 5-249 employees, meaning 95% of small businesses would not stand to benefit from the scheme.
- Widening the scope to 2-249 employee companies would deliver a GVA boost of £66m.
- Expanding the number of companies eligible will increase the absolute returns of the scheme.
Broaden the range of products covered, notable lines coming out of the research include:
- The scheme is limited and only applies to three types of software. This excludes other categories that would greatly improve companies’ productivity.
- Expanding the scope of software available would provide a £1.9bn GVA boost, at the same benefit-to-cost ratio for the taxpayer.
- Expanding the scope of software available and the scope of eligible companies would deliver even greater absolute returns, and £2.95bn in GVA.
Make sure that ‘add on’ products are included in the scheme, notable lines coming out of the research include:
- One piece of software is rarely the one solution that a company needs. Equally, software providers rarely offer a single product that does everything.
- The scheme should allow vouchers to be used to purchase combinations of software so that recipients can get the solution that they need and not only part of the picture.
Avoid restrictive criteria for each software vertical, notable lines coming out of the research include:
- The criteria for defining each type of software available under the scheme needs careful consideration.
- Criteria should be as broad as possible in order to capture all the beneficial elements that software can provide, such as e-commerce which requires multiple elements from stock management to logistics and payments.
Simple and clear process for companies to be included in the list, notable lines coming out of the research include:
- The process for software providers to join the scheme and be able to accept vouchers should be as easy as possible.
- This is important so that it is not only large companies that are able to navigate the system – smaller software companies should be able to easily offer their products.
Commenting on the report Dom Hallas, Executive Director of Coadec, said:
“If the Government wants to level up the UK successfully it must start by improving regional productivity. This means being more ambitious with its Help to Grow Digital scheme.
Our research shows that every region of the UK stands to benefit from expanding the Help to Grow scheme. Analysis of 12 Red Wall seats won by the Conservatives in 2019 shows that each constituency would benefit from a £3.5m in GVA on average, if the eligibility threshold was lowered for small businesses and if the software categories were widened.
We’re on the verge of finally cracking the UK’s decades-long productivity puzzle, but we stand to lose out on these massive gains unless we can successfully encourage SMEs to invest in the technology they need now. Expanding the Help to Grow scheme would do just that.”
Notes for editors
The report can be found in full here.
Data on the impact of changing the scope of ‘Help to Grow Digital’ can be found here.
- Data on the impact per constituency can be found here.