SME use of digital financial tools could help solve productivity puzzle, adding £25bn to the economy
If more of Britain’s smallest businesses could be persuaded to adopt digital financial tools, their growth could add £25.3bn to the economy and help close our productivity gap with countries such as France and Germany, according to new research from Starling Bank.
SMEs, which account for 99% of businesses in this country, spend an average of £63,000 a year managing their finances, Starling’s study of 1,000 business owners shows. If more were to use digital solutions for routine tasks such as bookkeeping, invoicing and tax returns, they could use the time and money saved to innovate and to seek new customers.
Adeel Hyder, Managing Director of SME Banking at Starling Bank, said: “Small businesses are the backbone of the British economy, but they are being held back by a ‘hidden tax’ on their time. Our research shows that a large number of SMEs believe digital tax software alone costs nearly £12,000 a year, when in reality, that’s fifteen times the price of some high-end solutions. For our part, Starling’s Making Tax Digital for Income Tax tool will be free from launch in March, so we can help entrepreneurs swap admin hassle for productivity gains.”
While 84% of SMEs already use digital tools for some financial tasks, nearly half (48%) do not expect to increase their usage, often feeling stuck due to entrenched processes and concerns over cost. Where digital tools are used for financial tasks, SMEs report an average time saving of 41% over manual processes.
An economic gain of £25.3bn is nearly double the economic contribution of the UK’s agriculture sector, showing how important it is that we help small businesses thrive.¹ This could help accelerate the closing of the productivity gap between our nation and other G7 countries.
Greater economic growth would also mean a significant boost to the Government’s coffers, reducing pressure on HM Treasury. With the Office for Budget Responsibility estimating a tax-to-GDP ratio of 41.2% for the coming fiscal year, reaching £25.3bn in additional Gross Value Added (GVA) through increased SME adoption of digital tools could generate £10.4bn in new tax receipts – exceeding revenue that would be raised by adding 1p to the basic, higher, and additional rates of income tax combined.
This is why Starling is presenting five key recommendations to the Government:
- Dismantle the Affordability Perception Gap: Create a new online ‘Financial Tool Cost Calculator’ within the Government’s Business Growth Service to show SMEs the true, lower cost of digital financial tools.
- Target Support: Prioritise microbusinesses and female-led companies, (27% of female-led companies say they have good opportunities to learn from other SMEs in their sector. This is 41% for male-led businesses), in all Government digital adoption pilots.
- Collaborate on Support Ecosystems: Co-develop all new advisory tools and communications with industry bodies and accountants, the intermediaries SMEs trust most.
- Embed in Government Digital Adoption Initiatives: Prioritise the uptake of effective core digital financial tools, especially those which save SMEs the most time and money.
- Integrate into National Mentoring Programmes: The new Business Mentoring Council should make digital adoption a main focus of mentoring support for microbusinesses.
Michelle Ovens CBE, CEO and Founder of Small Business Britain, contributed to the report. She said: “The digital gap is not just about technology; it is about trust and community. We know that small businesses are keen to adopt AI, but can be held back by barriers like lack of support, which can be particularly challenging for under-represented entrepreneurial groups. This report’s recommendation to build a ‘trusted support ecosystem’ is vital for all small businesses. There is huge opportunity for digital technology to boost UK growth, innovation and resilience, as well as levelling up opportunity for all. To do this effectively we need to meet business owners where they are, through their accountants, mentors, and local and peer networks, to give them the confidence to take that next digital step.”
Notes to Editors:
Methodology: The report is based on an online survey of 1,000 UK SME decision-makers conducted by Global Counsel between 23 October and 7 November 2025.
All figures in the press release can be found in the report apart from the below:
More information about Starling’s free Making Tax Digital tool: https://www.starlingbank.com/business/making-tax-digital/
