Small business tech investment could surge in 2024 as UK firms accelerate efforts to drive growth and improve customer experience, new research shows.
A survey from American Express shows three-in-ten independent retail and hospitality business owners plan to introduce new technology while more than one-quarter (26%) plan to ramp up sales and marketing activity.
Just under a quarter said they intend to bolster their sales capabilities in a bid to unlock additional consumer spending.
This confluence of business goals comes amid a challenging period for many firms across the country, with more than one-quarter of respondents revealing that attracting new customers is a key challenge.
Around one-third said they plan to improve customer experience this year, with technology likely to play a big part. Nearly half (43%), for example, said they'd beefed up technology investment ahead of the festive peak period in order to create a better experience for customers.
Despite ongoing challenges, small businesses said they're extremely upbeat about growth prospects in 2024, with 89% expecting to grow over the next 12 months.
93% also said they feel confident about the future of their business.
"It’s encouraging to see so many of the UK’s small retailers entering 2024 with an optimistic outlook," said Dan Edelman, general manager, UK merchant services at American Express.
"However, they know that they can’t stand still if they want to grow their business. Investing in new technology unlocks operational efficiencies, frees up valuable resources, and ultimately improves the customer experience."
Nearly 80% of the small business owners surveyed agreed that collaboration between local community businesses had increased over the past year, with three quarters agreeing that it's important for small businesses to team up to navigate the current economic climate.
This research from American Express aligns closely with an alternative study from small business platform Xero and economics consultancy, Cebr.
The joint study concluded that UK small businesses could generate £77.3 billion ($98.3 billion) in additional revenue and create 885,000 new jobs if they digitized at the rate of the top 20% of tech adopters.
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Those SMBs that had digitized significantly over the last four years grew revenue by 8.1%, compared with the slowest adopters, who saw revenues decline by 4.7%.
However, four-in-ten small businesses said they fail to see the relevance of new technologies to their company, with a similar number believing that tech investment wouldn’t deliver value for money.
The main hurdles to increasing tech adoption are a lack of knowledge or skills, cited by one-fifth of respondents. A lack of “clear expectations” and an inability to prioritize the right tech also holds companies back, the study found.
"This nation’s army of tiny firms already pack a punch, contributing billions to the UK economy and creating millions of jobs. But they have a different relationship with technology to larger SMEs, often without dedicated experts on hand to support adoption," said Alex von Schirmeister, Xero's UK managing director.
"The smallest firms suffer from a 'digital drag' where concerns over technology can suppress the transformational benefits to them. With the right guidance and support, these businesses could fuel even more economic growth and reach new levels of success with technology."
Small business tech investment has been rising
Small business tech investment has been accelerating rapidly over the last year as organizations across the UK look to weather uncertain economic conditions and unlock productivity benefits.
Research from Barclays in August 2023 showed that nearly half (45%) of firms have ramped up investment in a bid to modernize their tech stack and optimize operational efficiency.
In particular, SMBs told the financial services giant they had increased investment in data analytics and artificial intelligence (AI) tools.
Respondents said they consider integrating these technologies within their daily processes can help “counter rising costs” and increase worker productivity.
