A new report has shed light on the challenges and barriers to furthering the growth and innovation within the UK’s tech SMEs.

The research, from techUK with Beauhurst and Kytemark, finds there are over 190,000 tech SMEs across the UK employing nearly 700,000 people. This is nearly double the amount 10 years ago. 

However ‘UK Tech SMEs: Driving Economic Growth and Innovation’ features interviews with the founders of these businesses which highlight how lack of access to later stage finance, significant digital skills gaps, difficulty in generating sales prospects – particularly in a burdensome public procurement – and regional inequalities are preventing them from unleashing their full potential.

Many are closing or relocating to overseas markets. As a result, the UK is losing the economic and social benefits from these companies in the form of jobs, future tax revenues, and the innovations developed.

However, if tech SMEs are able to continue to start and grow just at the same rate as the past 10 years, there could be an extra 100,000 of them employing close to 1.4 million people in highly skilled, highly paid jobs.

The report suggests that if the government and organisations can address these challenges, the impact of tech SMEs in the UK will be greatly enhanced – and these companies will continue to spearhead technological innovations witnessed over recent years, developing the solutions into areas such as an ageing population and the climate crisis.

“Tech SMEs have made a substantial contribution to the UK, driving economic growth across the nations and regions and delivering real-time solutions to some of the UK’s most challenging issues,” said Matthew Evans, director for markets and COO of techUK. 

“However, despite their successes, they continue to face several barriers as they look to scale their business.

“If government can address some of those challenges, they can accelerate growth in the tech SME ecosystem. Support for SMEs to scale is integral to the growth of all sectors across the economy. 

“The innovative technologies SMEs are producing can improve UK productivity and lower barriers to accessing often critical public services for individuals, flowing through to economic growth for the whole of the UK.”

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Recommendations

techUK has drafted 12 recommendations for government to help support the UK tech SMEs market:

Tracking

Improving public data leads on UK companies and publish data on a regular basis to improve policy making and interventions for SME support. 

Finance and Funding 

Unlocking more investment for SMEs looking to grow by continuing the delivery of Mansion House Reforms, including a range of reforms to private pensions to ensure they are effective as possible in unlocking institutional investment. 

Drive greater diversity into the scale-up ecosystem through targeted initiatives, including the Venture Capital Fellowship programme. 

Restore confidence in the UK’s flagship R&D tax relief scheme, prioritising longer-term policy stability, effective administration from HMRC and better support for SMEs. 

Simplifying the process for securing public grants, such as Innovate UK, and exploring options to provide more grant funding and support for the commercialisation of innovative technologies. 

Opening more sales opportunities

Establishing a commercialisation Tech Taskforce comprised of regulators, businesses and Government to identify markets within the UK where tech innovation could drive significant change. 

Establishing the new Technology Procurement Delivery Body (TPDB) that includes Ministers and high-ranking civil servants to improve procurement processes and tackle existing barriers to procurement that levels playing field for SMEs. 

Engaging with tech SMEs to identify what information and support they need to expand and export internationally to inform how to improve and update government insight and support on expansion across in foreign markets. 

Talent 

Delivering the new Growth and Skills Levy and work with the tech sector to create a Digital Skills Toolkit. This will increase digital skills provision across the UK and encourage a more diverse and inclusive tech sector.

Developing practical ideas to connect to scale-ups to pools of talent, for example by facilitating partnerships with universities, allowing greater certainty over when visas will be granted by the Home Office and connecting SMEs to national and devolved Government skills initiatives.

Accelerating regional ecosystems

Delivering on the recommendations of the Harrington Review to create a more joined up investment offer with the support of Metro Mayors and Devolved Governments. 

Reviewing different SME support initiatives across the UK’s nations and regions to identify how to better facilitate joined up thinking and reflecting on best practice.

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