New Report Shows UK SMEs View Digital Transformation as Vital for Growth

Running a small business in the UK is no easy task, however, the lingering effects of the recent recession are now starting to shrink and 2024 is seeing inflation drop to its lowest level in two years.

With this in mind, SumUp surveyed 750 small UK business owners and decision makers within small UK businesses to see how confident they feel about the state of the current UK market, the challenges they are facing, and if their current confidence levels extend to future expectations.

Confidence levels over the next 12 months: 

Overall, business owners and decision makers are feeling confident about their business over the next 12 months, especially as the UK exits the technical recession it entered in 2023.

Over a third of respondents (36%) said that they are feeling confident that their business will overcome challenges and expect to perform well over the next year. Additionally, 24% said that they are very confident and believe that their business will grow significantly.

Only one in 12 (8%) said that they were concerned about their businesses’ future and expect there to be challenges, whilst all other respondents remained neutral about their future. Whilst 21.5% voiced that they were uncertain and expect their business to neither grow or decline significantly.

Current concerns and challenges among small businesses:

Small business owners and decision makers were asked what key challenges are currently influencing their confidence levels. Most respondents said that the biggest challenge they are currently facing is the economy, with over two-fifths (42%) of participants agreeing that inflation and rising costs including raw materials and stock have impacted the confidence in their business. Similarly, 41% said that they were struggling with the cost of bills and necessary investments such as rental costs, energy and new machinery.

The survey highlighted that competition among SMEs is getting tougher, with over one in five (22%) saying that competitors offering cheaper alternatives are one of the main factors influencing their business confidence.

Only 7% of small business owners and decision makers said that they were not facing any challenges.

How SMEs are staying on top of their concerns:

SMEs are taking a number of steps to stay on top of the challenges they are facing, with cost-saving plans at the top of their lists regarding supply chain and professional services, with 33% of owners and decision makers making changes. Similarly, just under a third (29%) of those surveyed said that they are working on plans to change their service providers including energy, gas, and Wi-Fi in order to save money on their monthly outgoings.

One of the other key concerns raised is that their customers are generally spending less, along with customer retention getting tougher. To combat  this, almost a quarter (24%) of respondents have lowered their prices in a bid to help retain customers, along with one in five (21%) expanding their current product or service to tap into new consumer groups.

Importance of digital transformation: 

From increasing efficiency, improving customer experiences, and scaling growth, digital transformation has many benefits to small businesses.

Whilst 18% of respondents said that they have already invested in digital transformation technology to support and grow their business, it appears that other small business owners and decision makers in the UK agree that it is important for future development.

One in three (30%) said that investing in digital transformation and technology is very important to their business, including purchasing on-the-go card machines, modernising their IT, or improving customer accessibility by opening an e-commerce store.

Furthermore, 41% said that digital transformation is moderately important and whilst they may not feel the need to invest in the technology right now, they do believe they will do in the near future.

Whilst 15% said that digital transformation holds slight importance, and although they believe it does have a degree of importance, it is not a top priority, and will be addressed after more urgent challenges are handled. Only 14% of respondents said that they do not think investing in digital transformation is important to support their business growth.

Corin Camenisch, Product Marketing Lead at SumUp commented on the survey: “As champions for small merchants, we conducted this survey to discover the confidence levels of small business owners and decision makers in the UK to better understand the challenges they face, gauge their optimism about their future, and identify areas where support for SMEs might be needed.

“Overall, confidence levels of small business owners and decision makers across the UK are high. This positive outlook suggests that small merchants are prepared to navigate potential uncertainties and continue to thrive.

“We have provided tips off the back of our findings for those just starting out in business, or who are looking to deal with unexpected market fluctuations on our full campaign page.”

For more information and business advice, please visit the full campaign page here: https://www.sumup.com/en-gb/business-guide/uk-business-confidence-report-2024/