As recession fades, UK SMBs invest in digital upgrades for growth

By Gloria Methri

SMBs in the UK are feeling confident about their business over the next 12 months and see digital transformation as a crucial lever for growth. According to a recent survey conducted by SumUp, 18% of small businesses have already invested in digital transformation projects to fortify and expand their operations.

A significant number of SMBs—30%—underscore the critical importance of investing in digital transformation and technology. These investments span a range of strategies, from acquiring mobile card readers to upgrading IT systems and launching e-commerce platforms to enhance customer access.

Meanwhile, 41% of respondents view digital transformation as moderately important. While they may not be committing funds immediately, there is a strong inclination to do so soon.

Interestingly, a smaller segment, about 14%, prioritizes other business challenges over digital transformation. In contrast, only a minimal 14% of businesses expressed scepticism about the necessity of digital transformation for their growth.

Growing Optimism Amid Economic Recovery

In terms of general confidence, business owners and decision-makers say they’re optimistic about the next 12 months, especially as the UK exits the technical recession it entered in 2023.

Over a third of respondents (35.9% SMBs) expressed confidence in overcoming challenges and thriving in the coming months. Another quarter, 24%, anticipates significant growth as the UK market recovers.

However, a cautious minority, 8%, remain apprehensive about their business prospects, while 21.5% predict their operations will neither grow nor decline substantially.

Challenges Facing UK SMBs

The most pressing concern for SMBs in 2024 is the spectre of rising inflation and a sluggish economy, a worry shared by 42.5% of business owners surveyed. Nearly half of the respondents identified the economy as their biggest challenge, with inflation and escalating costs of raw materials and stock undermining business confidence.

Similarly, 41% said that they were struggling with the cost of bills and necessary investments such as rental costs, energy and new machinery.

Competition remains a key concern for 22.5% of respondents, who are focused on staying ahead of local rivals. Meanwhile, 19.9% prioritize customer retention. Only a small fraction, 7%, report no significant challenges at present.

Strategic Responses to Challenges

In response to these challenges, most SMB owners (33%) have devised cost-saving strategies to mitigate rising supply chain and service expenses. Additionally, 29.3% plan to switch service providers to secure better deals on overheads like energy, gas, and Wi-Fi. A further 24% are contemplating price reductions to enhance customer retention.

An unexpected but noteworthy trend is the inclination of 21.2% of respondents to explore new product and service markets as a means of reaching untapped customer segments—an unconventional approach when considering cost-cutting measures. Reflecting the growing confidence in digital transformation, 17.6% of SMBs are eager to invest in new technologies and digital upgrades to drive business growth.