UK small businesses could add £25.3 billion to the economy if they increased adoption of digital financial tools, according to a new study by Starling Bank. The economic gain is nearly double the contribution of the UK’s agriculture sector and could help close the productivity gap with France and Germany.
Hidden Costs of Manual Finance
SMEs currently spend an average of £63,000 annually managing finances. Routine tasks such as bookkeeping, invoicing, and tax returns eat into time that could be spent driving sales. Where digital tools are used, businesses report 41% time savings over manual processes.
Barriers to Adoption
Despite widespread adoption, with 84% of SMEs using some digital tools, nearly half of these businesses do not plan to expand usage. Reasons include entrenched workflows and perceived costs. Many SMEs overestimate digital tax software costs, believing it could be £12,000 annually, while high-end solutions are 15 times cheaper.
Government Recommendations
Starling Bank recommends targeted measures to accelerate digital adoption; creating a financial tool cost calculator in the government’s Business Growth Service, prioritizing micro and female-led businesses, co-developing advisory tools with accountants, focusing on time-saving core digital tools, and integrating digital adoption into mentoring programs.
Industry Perspective
Adeel Hyder, Managing Director of SME Banking at Starling, said, “Small businesses are the backbone of the British economy, but they are being held back by a ‘hidden tax’ on their time. Digital tools can unlock enormous economic potential if adoption barriers are removed.”
