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One fifth of businesses still lack digital skills

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26th Oct 2016
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A “business digital index” study noted a steady increase in technology capabilities, but identified that 1.4m small businesses and 98,000 charities still lack basic digital skills.

The annual Business Skills Index is a collaborative project between Lloyds Bank, Accenture, the Department of Culture, Media Sport and Doteveryone initiative headed by Martha Lane Fox.

The index has been steadily rising during the past three years and is based on an assessment of five basic digital capabilities:

  • Ability to find, manage and store digital information and content
  • Communication and online collaboration skills
  • Online purchasing habits and use of government digital services
  • Participation in online communities and creating digital content
  • Problem solving - finding solutions and applying digital tools

The 2016 index established that 62% of small businesses fulfil all five critieria, with a 9% overall increase in the scores achieved compared to last year.

The study also found a large increase in use of government online services from 57% to 79% during the past year.

Given the government’s “digital by default” stance, and the requirement for companies running PAYE schemes to file online real time information returns, the 21% not using government services is an interesting variation on the Pareto ratio. If they are not online now, how will they be encouraged to do so - and how much effort will that take?

The question is an important one in view of the continuing march to online service represented by HMRC’s Making Tax Digital initiative. Results from the survey with Thomson Reuters of 1,000 accountants found that 57% still had “digitally excluded” clients, and 60% of respondents dealt with clients who did not have digital systems that would meet the requirements for MTD.

The detailed results present some fascinating insights for those interested in business technology use:

  • Use of cloud accounting more than doubled among small businesses during the past year from 14% to 34% in 2016
  • Internet banking is now used by 82% of small business and mobile payments have taken off over the past year to reach 35% of the survey sample
  • Seven out of 10 businesses responded that having a mobile is “crucial to the success of my business”
  • Social media activity is up from 23% to 36% of small businesses

The report also delved into the charity sector, identifying a bigger surge in the overall index in the past year (17%), but from a lower starting point, so that only 51% of charities are rated as having basic digital skills.

The index presents a compelling case for the link between digital maturity and organisational success  by pointing out that 20% of digitally skilled businesses have increased their turnover during the past years. Digitally mature charities, meanwhile, are 28% more likely to increase their income than those that lack tech skills.

The reasons why organisations are not doing more online are partly due to a lack of awareness -but also an inability to find the time or money to invest in digital skills: 69% of small businesses say they need to develop their tech skills. Yet two-thirds admit do not invest in any digital training. That figure rises to 78% among sole traders

While supporting an overall picture of steady progress within the UK’s digital economy, the index indicates that the great leap forward into the digital by default future is not going to happen without a significant shift in basic technology education and training.

Are the government and HMRC Making Tax Digital team paying attention?

For its part, Lloyds Bank hosts a Digital Know How toolkit on its website to help organisations improve their digital capabilities.

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Replies (4)

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By kevin503
27th Oct 2016 10:35

Social media activity is up from 23% to 36%? Interesting. If more people are using Facebook and Twitter at work does this always count as work?

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By Vaughan Blake1
27th Oct 2016 10:59

Digital tools? I am still not yet using metric spanners!

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By adam.arca
27th Oct 2016 14:16

Usual disappointing confusion of cause and effect that is to be expected from these sorts of survey: do they only employ 21 year olds to draw the conclusions?

The survey apparently said: "The index presents a compelling case for the link between digital maturity and organisational success by pointing out that 20% of digitally skilled businesses have increased their turnover during the past years. Digitally mature charities, meanwhile, are 28% more likely to increase their income than those that lack tech skills."

Well, in my humble opinion, that's [***] about [***]. Being digitally skilled is an effect of taking a mature approach, but being digital by itself is most certainly not a cause of being a mature business.

I'm also surprised that only 20% of businesses lack digital skills (which is the headline). I would say that it's more like 20% of businesses which really need digital skills lack them to a significant degree; if all other businesses were to be included which are too small to absolutely require them (whether they do in fact utilise digital or not), then you could probably double that percentage.

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Replying to adam.arca:
By Mike18
28th Oct 2016 18:16

I agree. With a constant drive towards digital processes, it's a surprise so many businesses have not abandoned their analogue ways by now.

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