The Shorthand – is technology the key to a booming economy?

Welcome to this week's edition of The Shorthand, your weekly digest of the top news stories that affect small businesses in the UK! Here, we break down the stories you may have missed during the week, detailing what they’re all about and, more importantly, why you should care.

And all that in under 5 minutes.

Go on, put the kettle on and we’ll have you caught up with the most pressing business news stories of the week by the time you’ve finished a cup of tea.

1. UK economy shrinks for two months in a row

What’s happening here?

According to recently published data for April 2022 from the Office for National Statistics (ONS), the UK economy shrank for a second month in a row. April saw a 0.3% contraction, even more significant than the 0.1% shrink in March 2022.

Perhaps more significantly, the contraction in GDP in April affected all three main sectors of the economy – services, manufacturing and production – for the first time since April 2021.

Why should you care?

Clearly we are all living in economically uncertain and volatile times, with factors such as energy price rises, high inflation, disrupted supply chains and war in Europe contributing to a difficult landscape for small businesses.

The unexpected news that the UK economy shrank again in the month of April is a cause for concern for all small enterprises as they struggle to cope with soaring costs and plan for an economic outlook in which recession is a distinct possibility.

Tony Danker, the Director General of the Confederation of British Industry (CBI), commented:

Times are tough for businesses dealing with rising costs…it won't take much to tip us into a recession, and even if we don't, it will feel like one for too many people.

Given that economic contraction occurred across all principal sectors of the economy, no small firms are left entirely unaffected by this worrying trend.

2. Tech holds the key to boosting the economy

What’s happening here?

According to research conducted by the accounting software firm, Sage, small and medium-sized businesses in the UK use technology to contribute £216 billion to the UK economy. However, the same report suggests that by fully unlocking the benefits of available technology, these same businesses could add an extra £232 billion to the economy.

Some sectors appear to be further behind than others, with beauty and wellbeing, retail, the creative industries, hospitality, and education showing the lowest adoption rates of data analytics technology, for example.

Why should you care?

Small business owners around the country will be acutely aware of the importance of adopting technology to grow their businesses.

The CEO of Sage, Steve Hare, commented:

We know there’s been a significant shift in the adoption of technology, with 91% of SMB telling us it was vital in the creation of their business.

However, only a quarter of SMEs surveyed have adopted technology to properly collect and analyse vital commercial data that can drive business performance. Indeed, almost a third of UK companies (31%) are reported to be “stuck in the past” according to research by Virgin Media O2; failing to adopt technology to keep pace with developments. Worryingly, this figure jumps to almost half (48%) of London-based companies, with antiquated practices such as manual filing and using landline-only phones still commonplace.

With 41% of SMEs concerned about adopting new tech due to cash flow pressure and 24% unsure of the return on investment, it is vital that newer, smaller businesses understand the huge potential benefits of technology adoption, both to them, and to the wilder economy.

3. Shoppers rally around small businesses

What’s happening here?

As any small business owner will know all too well, we are currently experiencing some of the most challenging external pressures on the economy in recent history. With inflation soaring and the cost of living putting extreme pressure on household finances, consumers are cutting back on spending. So far, so gloomy.

However, new research commissioned by American Express suggests that consumers are adjusting their spending to support small, local, independent businesses over larger firms during these uncertain times

More than half (52%) of small businesses surveyed believe customers are choosing to shop with smaller, independent businesses to support them during the current challenging trading environment, signaling a shift in spending habits.

Why should you care?

The outlook for the economy at large may seem somewhat bleak at the moment. However, this new research suggests that smaller, independent businesses are enjoying favourable preference amongst consumers who recognise the need to support local, independent enterprises.

The director of Small Business Saturday UK, Michelle Ovens, commented:

Such optimism shown towards small businesses is fantastic to see, especially as we navigate through a challenging time when they need our support more than ever.

The news that consumers appear to show a strong degree of loyalty to small businesses, even in tough economic times, provides a ray of light to struggling small enterprises.