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Why has the UK been slower to digitalise?

5th Jun 2023
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Xledger is a leading provider of next-generation cloud-based finance software. 

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In recent years, digital transformation has become a focal point for both government and industries worldwide. In the UK’s 2022 digital strategy, the Minister for Tech and the Digital Economy highlighted the £5 billion+ that UK businesses spent on digital R&D in 2020 alone — while emphasising a desire to go ‘further and faster’.

But, despite the ‘enduring spirit of innovation’ the Government champions, the UK has lagged behind others when it comes to digitisation.

Why has the UK been slower to digitise?

In response to the pandemic, a report from Manpower Group showed that only 23% of British businesses have directly accelerated their digital transformation plans, compared to 38% globally.

What’s more, a study by EY last year showed that, of the CFOs in large organisations surveyed, only 11% considered themselves to be at an ‘advanced’ stage of digitisation.

The UK’s digital lag applies to the Government, too, which acknowledges the National Audit Office (NAO)’s finding that previous attempts at digital transformation had ‘lacked specificity, cross-government endorsement, clear lines of accountability and business ownership. Subsequently, former flagship programmes have slowly shut down and failed to deliver results.’

But, if not for want of trying, why has the UK been slow to digitalise?

Initial cost barrier

Undeniably, digitising comes at a cost.

A 2019 report commissioned by the Department for Business, Energy & Industrial Strategy (BEIS) found that businesses, particularly SMEs, often feel inhibited from innovating or improving processes because of the material challenges they face.

Whether they’re struggling to access funding or feel the need to turn a profit before investing in digital transformation, the decision often tends to get kicked down the road.

This cost factor doesn’t just prohibit SMEs — the UK Government also recognises that it’s ‘held back by costly and outdated technology’ and ‘does not leverage scale in technology procurement’.

Choice paralysis and a skills gap

The overwhelming amount of choice available is also a significant barrier to digitisation — with 44% of UK SMEs saying there’s ‘too much confusing information’ about established tech solutions.

Choice paralysis, combined with the extent to which business leaders are aware of external competition, shapes their openness to integrating new procedures in order to stay abreast of industry developments, the BEIS report states.

A lack of skilled digital leadership, too, impedes progress in the public sector as well as in businesses, with the Government struggling to attract top digital talent and build digital capabilities in-house at scale.

Mismatched culture and attitudes

The NAO highlights a UK-wide tendency to blame tech when attempts to digitalise don’t work perfectly — which means businesses are reluctant to try again.

But in reality, it says, ‘when large digital business change programmes run into difficulty, there is rarely a single, isolated reason which causes [them] to fail. Many face intrinsic business challenges as well as technical challenges.’

The Global Center for Digital Business Transformation calls organisational change the ‘foundation’ of digital business transformation — because it revolves around changing the way people work, challenging their mindsets and the daily processes they rely on.

For UK SMEs, a business’s ability to deal with change significantly impacts the likelihood of them adopting new processes. For example, perceiving digitisation as a necessary part of running a successful business, versus sticking to ‘tried and tested’ methods.

An opportunity for accountants

While the barriers above may cause UK businesses to move slowly, one thing is clear: they recognise the tangible efficiency that adopting accountancy software brings.

When shown examples of new tech, SMEs were much more inclined to view accountancy software as more applicable to them, compared to HR or CRM software, for example — deeming it ‘useful’ with a clear time-saving benefit.

Hesitancy, however, comes in when businesses must buy software without trying it first — and most SMEs look for advice from their accountant on which product to purchase.

With demonstrated productivity improvements awaiting businesses that proactively adopt digital technologies, accountants have a real opportunity to help clarify the tech landscape and encourage growth.

To echo the UK’s digital strategy, our ‘economic future, jobs, wage levels, prosperity, national security, cost of living, productivity, ability to compete globally and geo-political standing in the world’ are all reliant on continued and growing success in digital technology.

By helping to remove barriers and encourage tech adoption among their clients, perhaps accountants can help galvanise that.

If you’re keen to boost your and your clients’ digitalisation, take a look at our specialist accounting and financial management software. Contact Phil Chalmers on [email protected] to learn more.