Xero calls on UK govt to step in on SME tech adoption

By Sunniva Kolostyak

Small business platform Xero is calling on the government in the UK to support tech adoption as smaller firms are at risk of falling behind in the post-pandemic recovery.

A Xero report looking at the global impact of Covid-19 found that resilience and recovery of a small business is ‘acutely’ impacted by how digitally enabled it is.

By analysing 300,000 customers’ anonymised and aggregated data, the FinTech found that small businesses who used apps to manage their business before the crisis saw 12 per cent smaller revenue declines than other small businesses, and 12 per cent smaller job losses. Small businesses with five more apps connected to their account had revenue falls that were one-third smaller and job losses that were 40 per cent smaller than other SMEs during the crisis.

However, the report, The recovery starts now, also indicated that smaller firms have been more affected than larger companies, with job losses looking to be almost twice as big.

As a result, Xero is calling on the government to urgently step in to encourage small businesses to make more of digital tools. Its policy recommendations include digital tools tax relief, improved regional internet access and an offset of technology expenses against tax, to help small businesses to digitise and build resilience for future economic challenges.

Gary Turner, Managing Director of Xero, commented that the post-lockdown economic recovery is at a crossroads now as furlough and eating out schemes come to an end.

“As unpredictable as this year has been, one certainty is that digitally-enabled businesses are likely to recover faster than those who aren’t,” Turner said.

“We’re calling on the Government to support business recovery with funding for tech adoption and the introduction of a tax offset for expenses against technology implementation. Driving digitisation will help countless small businesses to get back on their feet.”

The call comes after data from The Entrepreneurs’ Network shows that if the 1.1 million micro-businesses (0-9 employees) in the UK doubled their uptake of key digital technologies, the UK economy would get a £16.6bn boost.

The research, conducted between February and July this year, also found that digital adoption is growing, with cash flow reporting and management apps, and tools enabling e-commerce such as Shopify and Stripe being particularly popular. The share of businesses connecting new apps through the Xero marketplace was also almost double in April 2020 than in an average month.

Despite this, small business revenue fell more than a quarter in the UK at the start of lockdown and remained 13 per cent lower in July than the previous year. Australia and New Zealand have been hiring as trading restrictions and social distancing measures have been lifted, but jobs continued to decline in July in the UK, highlighting the severity of the employment crisis as the government’s furlough scheme begins to unwind.