What does the digital skills gap mean for small businesses?

Posted on
21st May 2018

When so many of us use computers for so many aspects of our lives – from online shopping, to renewing subscriptions to checking the weather – it may seem that the truly digital age has arrived. However, while each new generation acquires greater digital skills at a younger age, it’s also still the case that there are a substantial number of ‘digital-have nots’ in the UK.  For small businesses this poses challenges to its productivity and for its customer base.

The digital skills gap in business

Over a quarter of business owners (26%) in England lack confidence in their basic digital skills while over a fifth (22%) are convinced that a lack of these skills amongst their staff is holding them back , according to research by the Federation of Small Business.

On the financial front, a parliamentary report found that the digital skills gap is costing the UK economy an estimated £63 billion a year in lost additional GDP. This is backed up by a claim that 72 per cent of large firms and 49 per cent of SMEs continue to suffer skills shortages in their workforce. Another government report highlighted how skill shortages hinder the productivity gains expected through the use of digital technologies in up to half of all firms (e.g. in the areas of manufacturing) and others where employees need to be re-trained due to automation of manual jobs e.g. in logistics  and brick-laying. Digital skills shortages in the retail sector are said to threaten the move from conventional retail activity to e-commerce and mixed retail. ( Digital Skills for the UK Economy. BEIS & DCMS. Jan 2016 )

Yet despite evidence that better digital capability drives growth, it’s been found that a quarter (25%) of small firms do not consider digital skills to be important to the growth of their business. However, it’s crucial for these firms to understand the benefits of going digital if they want to remain competitive.

How do digital skills affect small businesses?

Information and Communications Technology (ICT) is vital to small businesses. Outdated paper processes and locally-kept records soon become difficult to manage. In the workplace, businesses are having to adapt to new technologies which will keep their businesses efficient and competitive – for example:

• computerised sales and invoicing systems
• accounting systems
• use of cloud services
• customer management services
• HR Systems
• integrated printing services
• Digital marketing

From the smallest micro-business to the top-end of a growing small-to-medium enterprise (SME), all will use ICT to some extent from sending emails to being fully up and running with e-commerce. Companies need to be able to recruit skilled employees and keep the digital skills of existing staff updated.  Businesses also benefit hugely from their existing and prospective customers being able to use the internet.

Crucially, it is SMEs, often more so than larger businesses, which benefit from emerging digital technologies such as social media and online selling and payments.  The government’s UK Digital Strategy claims that UK firms, compared to those in Europe, are “ less likely to digitise their back-office functions than their peers in other countries. Fewer than 20% of UK enterprises use software to share information across the organisation, compared to 40% in France and more than 55% in Germany and only 22% of SMEs in the UK use any form of e-commerce. 

So where is the digital skills gap?

Government figures have revealed that while 9% of adults in the UK have never used the internet (down from 10% in 2016; ONS, Jan to March 2017 ), 90% of men and 88% of women were recent internet users, up from 89% and 86% in 2016.

From the older demographic, just 4 out of 10 adults aged 75+ had used the internet in the previous 3 months of the survey period Jan to March 2017.

The use of the internet by region reveals some interesting results. It’s good news for businesses trying to recruit in the South East but less good if you’re in Northern Ireland.

What is the digital skills gap?

These simple figures of internet use mask the actual skill level of users. Using the internet to look at the weather is at one end of the digital skills scale, with more interactive and complex use sitting at the other. That’s why it’s useful to look at different digital skills levels. The government and its partners have developed five categories of ‘Essential Digital Skills’ for life and work.  In fact these have just been updated this year, the first update of the Basic Digital Skills Framework since its original publication in 2015.

The five basic digital skill levels refer to:

• Communicating
• Handling information and content
• Transacting
• Problem Solving
• Being safe and legal online

There are now (as of Spring 2018) 4.3 million people (8%) in the UK with zero Basic Digital Skills, though this is 470,000 fewer people than this time in 2017. ( Annual Lloyds Bank UK Consumer Digital Index 2018 )

More generally the positive benefits of enhanced digital capabilities for all – for business-owners and employees alike – are clear.
Having good digital skills can be financially and socially beneficial. These skills can also contribute to nurturing good mental health, an important point highlighted during the recent Mental Health Awareness Week (14-20 May).

● a report just published shows a £13,000 difference between the annual income of those with the full five Basic Digital Skills and those without. ( Lloyds Digital report 2018 )
● 82% of people credit the internet with connecting them better to friends and family
● 72% says it is helping to save time
● 53% say it has helped them find a job.
● For internet-users over 60, one in three say combating loneliness is a key benefit.

So what is being done to improve digital skills?

At the national level, government strategies include initiatives such as the UK Digital Strategy which sets out how it proposes to develop a “world-leading digital economy that works for everyone.”

At 360ict we are keen to help drive up levels of digital skill. Director Roy Charles has contributed to regional initiatives and chaired the South London Learning and Skills Council as a result of the active approach of his company improving digital skills.

Most small businesses tend to try to provide some kind of skills training for staff themselves. Yet there are concerns that many SMEs do not have any formal training plan or budget. Business-owners and managers may feel that they are too busy, that training is too expensive or that appropriate digital training is not available.

At 360ict we frequently talk to businesses about how to make digital technology work better for them. We have expertise in the most effective IT support solutions which will save your business time and money.

Whether it’s supporting your existing IT staff, managing your IT services , or something in between, please do speak to us.

To arrange your on-site review or talk to our IT support team about your options, call 0208 663 4000 today.

If you require any further advice or information please do contact us on 0208 663 4000 or Contact Us online.

<< Back to Blog