‘Limbo Ltd’: IT skills shortfall impacts growth of UK small businesses

  • One-in-five small businesses lack the basic IT skills needed for business
  • Lack of IT knowledge leaves businesses in ‘limbo’, hitting profits and growth
  • Older, techno-phobe businesses in danger of being eclipsed by tech-savvy start-ups

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UK small businesses are stuck in growth and profits ‘limbo’ due to a shortfall in IT skills, according to new research by Simply Business, the UK’s largest business insurance provider.

The 2012 techSME index, which questioned over 4,000 small businesses (with up to ten employees), reveals that one-in-five lack basic IT skills and 40 per cent of those identify this as a key factor hindering their growth. Those affected by skills shortages have also seen their profits hit, with the findings showing they are most likely to record no annual profit (17.5 per cent), in contrast to tech-savvy businesses, which recorded the highest overall returns (see table below).

One crucial area where small businesses are losing out is in harnessing the power of the Internet. Nearly half of small business owners admit they do not have a website (47 per cent) and over a third avoid using email (35 per cent), suggesting that many still rely solely on word-of-mouth to communicate with customers.

However, the level of IT-phobia varies between businesses, with more established companies in danger of being eclipsed by younger start-ups. Almost half (43 per cent) of businesses over ten years old reported a lack of IT knowledge, compared to only eight per cent of those operating for less than two years, suggesting business owners get ‘stuck in a rut’ and fail to keep up with the latest trends.

In addition, younger businesses are by far the most active on social media, with nearly half (45 per cent) of those operating for up to two years using social tools, compared to just a third (29 per cent) of those in business for over five years.

The research also revealed that IT spend is low on the agenda for the majority of small businesses with one-in-ten (11%) admitting they haven’t invested anything in IT in the last year and even more (17 per cent) anticipating zero spend in the coming year.

Jason Stockwood, CEO of Simply Business, says:

“Our findings show that IT is no longer an optional extra for small businesses. Companies of all sizes should be taking advantage of the technologies at their fingertips, or they will be quickly left behind in a competitive marketplace. Whether it is simply to help manage admin, reach more customers or develop innovative new products, IT is a key enabler for staying ahead of the competition.

“SMEs are frequently seen as one indistinct group, with the major focus on either young start-ups or larger businesses offering significant employment. Our concern is that those in between the two are getting stuck in ‘limbo’, partly due to a failure to embrace new IT tools and innovation. At a time when the economy is desperate for growth, it is crucial to support these businesses, giving them the skills to take the next step on their business journey.”

Simply Business has launched the techSME campaign as part of its ongoing commitment to support the UK’s small business community, seeking to promote the benefits of IT innovation as a core attribute of success, while continuing to utilise the latest technology to design and deliver its own customer-focused insurance products.

Ten least IT savvy small business sectors
1 Construction/tradesmen
2 Recruitment/HR
3 Property (landlords)
4 Medical
5 Health and beauty
6 Cleaning
7 Engineers
8 Architects/surveyors
9 Management consultant
10 Entertainment/arts

Research methodology

Information and research data outlined in the techSME report is based on a research questionnaire issued to a database of Simply Business customers throughout the UK, as well as a series of customer interviews. The national survey was answered by a sample of 4,088 individual business decision makers, comprised largely of founders, owners, CEOs, MDs and partners. Two thirds of the sample was made up of sole traders and a third of businesses with up to ten employees.

For further information, please contact:

Sophie Howard / Ben Jenkins
+44 20 7009 3128 / +44 20 7009 814

About Simply Business

Simply Business is the UK’s biggest business insurance provider, specialising in public liability insurance for SMEs and landlord insurance.

Launched in 2005, Simply Business provides an online brokerage service delivering policies tailored to individual business requirements. It has a team of UK based insurance specialists and employs almost 300 people across offices in London and Northampton.

Simply Business provides insurance to more than 400,000 UK SMEs and landlords and owing to its internal underwriting capability can cover over 1,000 trade types. It has been a Sunday Times Tech Track 100 company for the past three years and was recently named in the Deloitte Technology Fast 500 EMEA. Revenues have grown from £4.2 million in 2006, to £25.4 million in 2014, and the company has been named 2015 and 2016 winners of The Sunday Times’ Best Company to Work For.