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Digital divide remains as small firms focus on survival

Digital divide remains as small firms focus on survival

EuropeResearchTop Stories

New behavioural science research from Xero found that despite the critical role of technology during the pandemic, there is still a digital divide among small UK firms. 

According to One Step, a study of more than 1,000 small business owners in the UK, carried out in partnership with behavioural science consultancy, Decision Design, there is resistance to change and a lack of confidence, preventing investments in new technology. This confidence gap stems from several behavioural barriers – mindsets and perceptions about technology and change that frequently recurred among small businesses.

“In times of stress requiring rapid adaptation, we have to choose between fight, flight or freeze responses,” said Sonya Dineva, Lecturer in Business Psychology at the University of East London. “In many cases, such as the current pandemic, fear and inertia can hamper our ability to ‘fight.’ By focusing purely on survival, small business owners may inadvertently decide not to do anything at all, adopting a ‘freeze’ approach to managing change. This may obscure their broader strategic vision and shift their focus onto short-term goals; as a result, they fail to see the pitfalls of such actions and the plethora of growth opportunities that could be hidden in crises, including the benefits of digitalisation.”

A large portion of UK small businesses (six out of 10) claimed to be confident when embracing new technology, while the same number of respondents were excited about the prospect. However, there are still many barriers holding them back.

After what has been a tough 18 months for many, only four out of 10 UK small businesses are open to taking risks when making business decisions, while five out of 10 are reluctant to accept the risk of negative outcomes from tech-related decisions. Day-to-day survival is clearly a priority, with seven out of 10 admitting they are focused on this rather than how to better run their business. This filtered through to tech-based decisions too; only three out of 10 said they would consider themselves worse off if digital investment is postponed.

Compared to small businesses surveyed for Xero globally, UK small businesses were the least likely to agree that new technology would benefit them once integrated (four out of 10), or result in immediate cost savings (three out of 10), time savings (four out of 10) and immediate return on investment (three out of 10).

However, this scepticism could prove costly for those small businesses that will soon be required to submit tax digitally – with the looming Making Tax Digital (MTD) deadlines for VAT-registered businesses with a taxable turnover below £85,000.

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