SME Technology Adoption in the United Kingdom

1. Introduction

This report presents the findings of a project undertaken by the OECD Committee on SMEs and Entrepreneurship (CSMEE) in collaboration with the UK Department for Science, Innovation and Technology (DSIT) on “SME technology adoption and diffusion in the United Kingdom”. It draws on discussion with UK national and regional stakeholders, both from the government and the private sector, as well as an international policy comparative analysis to propose a series of measures that the UK government could consider in order to enhance technology adoption in the SME population.

The report is structured around three main sections. The first section sets the context by providing a statistical overview of SME technology adoption in the United Kingdom covering, among others, information by firm size, sector, type of technology and regions. This section shows that UK regional disparities are also reflected in very different patterns of technology adoption. The second section presents the main findings from two rounds of discussion held by the OECD with national and regional stakeholders, notably from the Greater London, West Midlands and the North-East (July and October 2025). This section covers the key barriers to technology adoption, technology diffusion channels, regional influences, monitoring and evaluation issues, and technology adoption policies. Building on this analysis, the third and final section presents fifteen detailed policy measures which the government of the United Kingdom could consider to further enhance technology adoption in SMEs. The policy measures are organised around three broad categories: technology adoption, which is at the core of this report; skills development to support adoption; and the regional dimension, to ensure that technology adoption policies contribute to reducing regional inequalities and promoting balanced growth across the country. These policy measures have been presented to national and regional stakeholders in the context of a second fact-finding mission (October 2025), with a view to testing and fine-tuning their validity.

Box 1.1 offers a synthesis of the main findings of the report. The project also included the draft of 12 in-depth policy case studies which are available on the webpage of the report, as well as through weblinks in the Annex of this report.

Box 1.1. Key messages.

Survey evidence on SME technology adoption in the United Kingdom

• UK businesses (of all sizes) have a higher rate of technology adoption than the European Union (EU) and OECD averages, particularly for mature digital technologies such as cloud computing and data analytics. However, the uptake of more advanced and transformative technologies, such as AI, robotics or automation, is still relatively limited considering the level of income of the country. SMEs, especially larger ones, have mostly closed the digital gap with large companies in the adoption of mature technologies (e.g., websites, e-sales or accounting software), but still lag behind in the deployment of more advanced technologies. Finally, there are strong regional differences in technology adoption rates, reflecting the economic geography of the United Kingdom. London and the South-East, in particular, lead on most technologies, while the North-East and Yorkshire and the Humber, both in the north, are the two English regions lagging furthest behind.

Technology adoption barriers

• Stakeholders highlighted many of the same barriers to technology adoption as raised in the recent Technology Adoption Review of the UK government (Department for Science, Innovation and Technology, 2025[1]). Notably, many stakeholders identified the cost and relevance of technology solutions as the two main barriers to technology adoption. Cultural issues were also flagged, including the age of business owners, especially in manufacturing, and distrust of technology vendors. This situation leads to a “wait-and-see” approach, where SMEs adopt new technologies only after they have been validated by peers, slowing the pace of technology adoption and diffusion.

Technology diffusion channels

• Peer learning, supply chain pressure, and technology demonstration, including by intermediary organisations, are all important technology adoption channels in the United Kingdom. However, the relevance of each of these channels varies across different sectors and technologies. Peer learning is especially relevant in manufacturing, where both the average age of business owners and the cost of technology adoption is higher than the average. Pressure from buyers is an important technology diffusion channel in the context of supply chain relationships, especially when buyers support suppliers in the adoption process. Intermediary organisations play multiple roles across different levels of technology maturity: Catapults help connect businesses with cutting-edge research, while other intermediary organisations, such as Business Growth Hubs, help SMEs navigate a fragmented public support system and overcome the abovementioned distrust of technology vendors.

The regional dimension of technology adoption

• Regional stakeholders from the three visited regions (Greater London, West Midlands and North-East) highlighted that national policies should be flexible enough to adapt to local specificities, while also acknowledging the importance of national policy guidelines and national branding to ensure consistency across the country and signal national priorities to regions. From a budgetary perspective, stakeholders mentioned that while funding decisions should be national, spending decisions should be local to better reflect regional differences.

• Multilevel governance in technology adoption policies is largely ad-hoc in the United Kingdom, as there are no specific standing consultation mechanisms between national and subnational governments or between the public and private sector. Nonetheless, many stakeholders considered this model to work well in practice. The consultative processes behind the Technology Adoption Review and the new Modern Industrial Strategy were brought up as positive examples. At regional level, institutional collaboration mostly relies on informal networks in relatively close-knit communities of practitioners.

Technology adoption policies (focus, design and delivery)

• Stakeholders reported that the United Kingdom performs well in early-stage research up to the phase of prototype development, while it does less well when it comes to research commercialisation. This point was also expressed in terms of technology readiness level (TRL), suggesting that the United Kingdom has a good support system up to TRL 6-7, while it is weaker in the final stages of TRL 8-9. This “early-stage” bias was also observed in business support policies, with many stakeholders claiming that the United Kingdom provides adequate support for start-ups, but less for scale-ups.

• Stakeholders also observed that UK innovation policies are mostly focused on supply-side measures, especially through the offer of finance, leading to an excessive reliance on programmes that provide ad-hoc grants, resulting in policy fragmentation that may hinder longer-term, strategic technology investments. To tackle this problem, it was suggested that greater emphasis should be placed on skills development and advisory services (both management and workforce skills, especially through short and industry-driven formats), rather than only finance.

• Although stakeholders lamented fragmentation in policy implementation, few thought that one-stop shops, whether online or brick-and-mortar, would be a strong response. On the other hand, multi-year programme funding was considered a possible solution, with positive implications also for longer-term technology investments.

• A major issue that emerged in the consultation process was the trade-off between the outreach and intensity of technology adoption policies. Some stakeholders argued that support should focus on those companies where technology adoption has the greatest likely impact on productivity growth, roughly corresponding to companies in the top quartile of the productivity distribution. However, other stakeholders stressed the importance of an inclusive approach to technology adoption policies to ensure that the productivity benefits reach wider groups of SMEs.

• Some stakeholders also expressed concerns about rigid programme design in specific programmes they see as enablers of technology adoption, such as the apprenticeship levy and the R&D tax credit. The former was criticised for its rigid eligibility rules, minimum duration requirements, and narrow focus on formal qualifications. As to the latter, many called for reforms to improve its predictability and administrative efficiency.

Technology adoption policies (specific programmes)

• The Catapults were widely regarded as the main UK policy supporting industry-university collaboration. Stakeholders discussed the current “one-third funding model” of the Catapults and noted that its long-term sustainability could be affected by potential shifts in the balance between national and devolved R&D funding. Some stakeholders advocated for a larger role of the Catapults in supporting small business technology adoption, but others suggested that this would dilute the scope of their work, which should stay put on R&D and technology development. In this respect, some stakeholders noted that the Catapults would be the right organisation to support research commercialisation efforts at TRL 8-9 level (see above), which they viewed as a key step for wider diffusion by reducing risks and making solutions replicable and adoptable by a broader SME base. However, this change would also require more funding. Finally, most stakeholders agreed that although the Catapults are located in specific regions, their outreach is generally nationwide.

• Made Smarter was praised for its hands-on and case-driven approach, combining tailored advice with funding and training. Stakeholders held mixed views on extending the programme beyond manufacturing. While some were supportive of its expansion into professional business services, others cautioned that broad sectoral expansion could dilute the programme’s brand. Stakeholders also talked positively of the “Help to Grow: Management (HtGM)” programme, a government-backed 12-week executive development course catering to SME senior leaders, in line with existing formal evaluation evidence.

• By contrast, although the “Help to Grow: Digital” (HtGD) programme (i.e., a voucher scheme for the acquisition of digital technologies) contributed to positive outcomes for SMEs that engaged with the scheme, it suffered from low uptake. This may have been due to a number of issues, including eligibility requirements (i.e., initially only companies employing at least 5 employees, later reduced to 1 or more employees), limited flexibility in the use of vouchers, the narrow range of software on offer, and the need for greater communication about the scheme. This experience seems to have introduced a negative bias about vouchers, which have often been considered of limited effectiveness in catalysing long-term improvements in technology adoption. International evidence, however, suggests that well-designed voucher schemes can deliver positive effects on SME innovation and performance, especially when they are simple, flexible and embedded in broader advisory or collaboration support.

Suggested policy actions

• Against this background, fifteen policy actions are proposed to support SME technology adoption in the United Kingdom under the three complementary categories of “technology adoption”, “skills development” and the “regional dimension”. The first category includes “core” technology adoption measures, such as simplifying the national R&D tax credit to better favour collaborative research that also includes SMEs and position Made Smarter as the national programme for the technology upgrading of small manufacturers. Skills development is closely complementary to technology adoption, as the latter often requires the upgrading of management and workforce skills. Suggested measures in this category include making peer learning a core activity of technology adoption policies and building on the Growth and Skills Levy, including through the development of micro-credentials, to make it better suited to the needs of SMEs. Finally, regional disparities have been a longstanding concern of the UK government. Here, the main policy proposals include drawing on the experience of cluster policies in the EU (e.g. France and Germany) for the implementation of the new UK Local Innovation Partnership Fund policy and developing a national programme of rural innovation to ensure that peripheral areas are not left behind by technology adoption policies.

References

[1] Department for Science, Innovation and Technology (2025), Technology Adoption Review: 2025, https://www.gov.uk/government/publications/technology-adoption-review.