Digitalization is a powerful growth lever in today’s economy, but companies are not always up to speed with technological developments, especially small and medium-sized enterprises (SMEs). According to new research from Sage, 85 percent of European SMEs consider digital tech as a key element to their growth plans. Meanwhile, SMEs in the EU have only increased their tech investments by 16 percent on average over the past year. Sage’s report suggests that bringing the slowest adopters of digital tech among SMEs in line with the average companies of the same size could contribute €628 billion to the EU economy annually.
Europe’s 25 million SMEs account for 99 percent of all businesses and two-thirds of private sector jobs and must be placed at the center of the EU’s digital transition, recommends Sage. The study found that SMEs are outperforming the overall European economy, as they reported, accounting for inflation, a 4.2 percent year-on-year increase in real terms profitability in the first quarter of 2023, significantly ahead of economic growth at just +0.2 percent. Despite these positive findings, many businesses report facing major challenges in a volatile and unpredictable economy. Reduced consumer spending, increased wage costs and cashflow and liquidity problems have been identified as primary barriers to growth. Lagging behind in the digital transformation “is certainly not the result of a lack of willingness from SMEs,” emphasizes the report.
The document also highlights optimism towards artificial intelligence (AI), which has been adopted by 34 percent of the sampled companies. This marks a significant increase from just 8 percent in 2021.
The new study from Sage, titled “Empowering SMEs in The Digital Decade: The 600 billion EUR opportunity,” is based on the voices of more than 15,000 SME representatives from 15 EU Member States, including Germany, France, Italy, Spain, Poland, Romania, Netherlands, Belgium, Greece, Czech Republic, Portugal, Sweden, Hungary, Austria and Bulgaria. The report is available for download from the Sage website.
