This chapter presents the main findings of a consultation process with national and regional stakeholders on issues and policies affecting SME technology adoption in the United Kingdom. The chapter highlights the continued importance of demand-side barriers, particularly the cost and perceived relevance of technology solutions, alongside behavioural and cultural factors that can delay adoption. It also shows that diffusion occurs through a range of channels, including peer networks, buyer-supplier relationships and intermediary organisations, whose roles differ across different sectors and technologies. The chapter also emphasises the importance of the regional dimension in shaping both business needs and policy delivery, pointing to the value of nationally coherent but locally adaptable policy approaches.
SME Technology Adoption in the United Kingdom
Abstract
This chapter presents the main findings from a first consultation process that the OECD undertook with national and regional stakeholders from selected regions, notably the Greater London, West Midlands and the North-East (July 2025), to gain insights on main barriers and drivers of business technology adoption in the United Kingdom, as well as recent policies in this area (see Annex A for the list of organisations which took part in the meetings). This first consultation process was key to obtaining an understanding of the state of technology adoption in the United Kingdom, with a view to suggesting policy proposals (see chapter 4) that are anchored to the UK context and that the UK government could consider in order to strengthen technology adoption and diffusion in the UK SME population. The policy proposals were eventually tested in a second consultation process (October 2025) with the same stakeholders who participated in the first fact-finding mission.
Technology adoption is one of the main channels to boost productivity growth, a key national priority in the United Kingdom, as in many OECD economies. The UK government has recently released different strategic documents to move forward in this national agenda, including the Technology Adoption Review (June 2025), the UK Modern Industrial Strategy (June 2025), and the national SME Strategy “Backing Your Business” (July 2025). The Technology Adoption Review identifies major barriers and enablers of technology adoption, as well as broad policy solutions (see Box 3.1) (Department for Science, Innovation and Technology, 2025[1]). The UK Modern Industrial Strategy translates this into policy measures to raise productivity by strengthening innovation, technology adoption and skills development, with a clear sectoral1 and regional focus (Department for Science, Innovation and Technology, 2025[2]). Finally, the SME Strategy sets out a plan to boost productivity and growth among SMEs, focusing on five pillars: fixing the fundamentals, unlocking access to finance, backing the everyday economy and high streets, future-proofing business skills, and opening up opportunities (Department for Business & Trade, 2025[3]). The regional dimension emerges as a common thread across the main recent strategy documents of the United Kingdom, reinforcing the value of visiting three different regions in the context of the consultation process.
Against this institutional background and building on the meetings of the first consultation phase, this chapter offers qualitative evidence on the following issues in the United Kingdom: barriers to technology adoption, technology diffusion channels, the regional dimension of technology adoption, monitoring and evaluation issues, and current technology adoption policies (policy focus, policy delivery arrangements and specific programmes).
When it comes to barriers to technology adoption in the small business population, the OECD fact-finding mission echoed many of the findings from the recent UK Technology Adoption Review (2025) (see Box 3.1).
Based on a mix of survey evidence and consultation processes, the UK Technology Adoption Review argues that the main barriers to technology adoption in the United Kingdom can be grouped into those that are internal to firms and those that are external. Internal barriers include: a) “financial constraints”, not only the upfront investment costs but also implementation, maintenance and subscription costs, which are most felt by cash- and credit-constrained small companies; b) “lack of workforce and management skills”, with the latter being defined as “a blend of technical proficiency, leadership abilities, and business acumen”; and c) “resistance to change”, which is a cultural issue – in many companies, especially if there is no urgent external pressure, there may be a natural preference for “business as usual” – but also an economic one, since changes in business models, business practices and technologies often have reorganisation costs.
The main external barriers reported in the UK Technology Adoption Review include: a) “information constraints”, especially with respect to new emerging technologies like Artificial Intelligence; b) “safety and security” issues, which are partly related to the abovementioned information barriers, as business owners may feel some technologies are not mature, may be counterproductive for the business, or may have other negative side effects, like in terms of cybersecurity; c) “policy and regulation uncertainty”, including the risk of regulations changing too often and too fast to keep up with rapidly evolving digital technologies; and d) lack of access to technology infrastructure.
Source: UK Government (2025), Technology Adoption Review: 2025, 23 June 2025, https://www.gov.uk/government/publications/technology-adoption-review
Most stakeholders stressed that the cost and appropriateness of technology solutions remain key barriers to adoption, especially for SMEs. There is a widely held view that mainstream technology products are designed (and priced) with large companies in mind, making them unaffordable and/or ill-suited for smaller businesses. As a result, high-quality software is often out of reach for small businesses, while lower-cost alternatives may lack functionality, scalability, or reliability, thus not representing a viable option.
In addition to pricing challenges, it was reported that many SMEs find it difficult to assess which tools are best suited for their specific operational needs, with a lack of trust in technology vendors that further exacerbates this problem. This seems to be a recurring concern, as it was also identified in the evaluation report of the “Help to Grow Digital (HtGD) programme” as one of the possible causes behind the high rate of small businesses that had never claimed the government digital voucher (Department for Business and Trade, 2024[4]). Concerns raised in the consultation process range from aggressive sales practices and misaligned offerings to a lack of understanding of sector-specific technologies and limited post-sale support. The involvement of technology providers in policy implementation may offer a solution to overcome these problems. For example, some countries, like Singapore, have placed large technology vendors at the core of their SME digitalisation policies. However, IT-based SME networks have rather suggested that their members are better placed to offer the tailored services that SMEs need. Either way, closer interactions with technology providers, whether large or small, in the stage of policy implementation could help build better trust amongst the SME clients.
Cultural issues were also flagged among the main technology adoption barriers. Many SMEs, especially in manufacturing, are led by relatively old business owners. Stakeholders noted that these owners can be reluctant to adopt new digital technologies and tend to rely on outdated IT systems. This choice, however, cannot always be dismissed as cultural resistance, as it may also represent a rational choice if older business owners do not have concrete “business succession” plans and do not envisage continuing operations for much longer. For example, a recent OECD survey shows that there is a negative correlation between the age of business owners/CEOs and the existence of structured and planned digital processes at the firm level (Bianchini and Lasheras Sancho, 2025[5]). This indicates that technology adoption choices (and related policies) cannot always be divided from broader considerations, such as the aging population of business owners. Cultural factors may also affect technology policy delivery. Some programmes, like Made Smarter, rely on industry consultants who tend to be seasoned and experienced. While this choice brings much-appreciated industry experience into the programme, it may also introduce a bias in the type of technology solutions that are offered to client businesses, as older consultants may be more comfortable with mature technologies that they know better.
Cost, inability to identify the most appropriate solutions, lack of trust in technology vendors, and cultural factors compound the fear of making wrong (technology) investment decisions, which was also commonly mentioned by stakeholders in the consultation process. This is especially true if the introduction of new technologies disrupts current operations, meaning that a botched technology adoption process, far from improving productivity, can undermine the future viability of the business. Smaller companies, which are less able to absorb the cost of failed adoption, are particularly exposed to this problem. This cautious environment leads to a “wait-and-see” approach, where SMEs adopt new technologies only after they have been validated by peers, slowing the pace of diffusion. In this respect, the importance of peer learning has been stressed multiple times during the fact-finding mission.
Artificial Intelligence (AI) represents a particular source of uncertainty and concern. While stakeholders recognised the long-term potential of AI, especially in applications like predictive maintenance or customer analytics, there were doubts about its immediate relevance and affordability. Recent DSIT research on AI adoption finds that the most commonly cited barriers are a lack of identified need and limited AI skills and expertise. Ethical concerns also matter, as well as high costs and regulatory uncertainty (Department for Science, Innovation & Technology, 2026[6]). Stakeholders also highlighted concerns around data monetisation and data confidentiality, which can contribute to a cautious approach to experimentation. These barriers need to be considered in the context of UK AI policies, which are also at the core of the new national industrial strategy2.
Based on the consultation process, many SMEs reportedly adopt technology primarily to reduce costs, notably labour costs, rather than to boost productivity per se, or as a strategic investment choice. Adoption is more likely to happen when digital tools are clearly linked to the solution of day-to-day operational problems, such as inventory management, customer invoicing, or quality control. For example, Customer Relationship Management (CRM) software, cloud storage, digital payments, and basic data analytics are widely used across sectors, while many SMEs struggle with more complex digital transitions, such as implementing full-scale Enterprise Resource Planning (ERP) systems. Similarly, in the case of AI, SMEs tend to prioritise “back-end” uses, including bookkeeping, workflow optimisation, and customer flow management, where efficiency gains cut across size, industry and region and are more immediate. By contrast, the adoption of customer-oriented systems, typically more complex and requiring better tailoring to business models, remain for the moment less frequently deployed.
Peer learning, supply chain pressures, and technology demonstration, including by intermediary organisations, all play an important role in driving technology uptake in the United Kingdom, although the relevance of each of these channels varies across different sectors and technologies. For example, peer learning is especially relevant in manufacturing, where technology adoption may be quite costly, not only in financial terms but also in knowledge and capability terms (e.g. specialist skills, integration know-how and change to production routines), especially when it involves new industrial digital technologies or machinery. In this sector, SMEs are more likely to adopt new technologies when they see others, often competitors, do the same. Technology adoption is, therefore, the result of competitive pressure, but also a “risk reduction” strategy that builds on the example set by others. While this approach generally works well, one downside is that it depends on technology leaders willing to move first, which may be less available in less developed regions.
Accordingly, initiatives to strengthen peer learning (e.g., network events, case-sharing platforms, and practitioner forums) were widely supported by regional stakeholders. Several interviewees highlighted the potential value of creating more formal mechanisms to share lessons from firm-level technology adoption and government programme implementation. For example, one suggestion was to develop knowledge repositories that would document common barriers, effective delivery models, and sector-specific challenges. By capturing firm-level experiences in a structured and accessible format, such a repository could help SMEs learn from each other about successful digital adoption pathways3.
Supply chain relationships have also been reported as a common technology adoption channel. This is broadly in line with findings from the empirical literature, which has repeatedly found that business internationalisation has a positive effect on technology adoption (Skare and Riberio Soriano, 2021[7]; Sweeney, Taschner and Grünewald, 2020[8]). In this context, technology adoption is mostly the result of pressure from buyers, which requires suppliers to comply with Original Equipment Manufacturer (OEM) standards and may provide technical support towards this end. One downside of this channel is that OEM technologies are generally company-specific, which makes it difficult to use them in other contexts than the specific supply chain where they are demanded, thus reducing technology spillovers in the rest of the economy.
Government supply-chain development policies, therefore, must find the right balance in terms of technology focus, between helping local companies serve the immediate needs of large buyers, whether they are present in the region or not, and keeping the ability of the same companies to diversify demand and supply other clients. In Scotland, for example, in renewable energy sectors (e.g., offshore wind, hydrogen, and tidal power) large-scale infrastructure investment and active public support have sent clear market signals to SMEs, with supplier development initiatives that have been part of broader public efforts to enhance SME competitiveness (e.g., the Scottish Manufacturing Advisory Service programme).
A third important technology diffusion channel is represented by intermediary organisations,4 which are key to helping SMEs navigate a fragmented public support system and overcome the abovementioned distrust of technology vendors. Intermediaries act as neutral, credible brokers signposting relevant tools, funding opportunities, and training to companies, thus reducing the search costs associated with technology adoption. They also mediate between technology vendors and small businesses, thus lowering business owners’ fears of investing in wrong technology solutions. Intermediary organisations were particularly valued in the context of emerging technologies like AI where they play an important dissemination role, explaining possible uses and impacts and appeasing concerns over data monetisation and confidentiality among small businesses (see above). Partnerships that combine technical expertise and financial services, such as the MTC – Lloyds SME Support Service, can be particularly effective in this intermediary role (see Box 3.2).
Since 2015, the Manufacturing Technology Centre (MTC) and Lloyds Bank have partnered to support innovation, productivity and skills development in UK manufacturing. The partnership combines MTC’s technical expertise with Lloyds’ client base and financial services and includes services such as the Manufacturing Support Service, the Sustainability Line Walk, and Apprentice Services.
Within this framework, the partnership offers a dedicated SME Support Service, to help manufacturing and engineering SMEs to adopt new technologies, develop their workforce and improve productivity. The SME Support Service includes three components:
SME Apprenticeship Support Service: provides financial and practical assistance to help SMEs take on new apprentices. MTC’s training experts offer one-to-one advice on apprenticeship funding, run a full recruitment service to identify suitable candidates, and, for eligible SMEs, provide salary support (through Lloyds Bank’s levy transfer) for the first year of the apprenticeship.
SME Training Service: gives SMEs access to a selection of MTC Training’s courses to upskill their workforce and increase awareness of disruptive technologies.
MTC’s Manufacturing Support Services: offer free consultations with MTC experts to help SME manufacturers adopt new technologies and improve their processes.
A key feature of the partnership is the mutual referral mechanism: MTC can refer SME clients to Lloyds Bank for appropriate financing solutions, while Lloyds can refer its SME customers to MTC for technical advice and support with technology integration. In this way, the partnership combines Lloyds’ large SME client base with MTC’s technical expertise and acts as a neutral intermediary between finance providers, technology vendors and SMEs.
By 2025, over 700 SME manufacturers had been referred to the partnership. Of these, more than 115 had worked with MTC on projects tailored to their business, generating over GBP 8 million in additional value through equipment upgrades, automation and sustainability-related improvements.
Finally, stakeholders’ views on the role of universities as diffusion agents were more mixed. On the one hand, universities were generally appreciated for their strong research expertise and technical equipment, making them relevant players in the context of high-tech projects involving collaborative research and testbed activities. Notably, university contributions to the Catapults, one of the mainstays of UK innovation policy, were positively assessed by the two Catapults met during the consultation process. In this respect, the Tony Blair Institute has recently proposed establishing a national network of university-based technology adoption centres whose role would be to provide diagnostics, management training, peer learning and hands-on advisory support to businesses (Tony Blair Institute, 2025[9]). On the other hand, views on university participation in management training programmes, especially for small companies, were more guarded. Some stakeholders felt that universities were sometimes conceptually too far from the practical technology challenges facing small businesses and, as a result, pointed to vocational colleges as better delivery agents for this task thanks to their strong regional presence, closer ties with local employers, and focus on applied learning5.
National-regional relationships
When it comes to the regional dimension of technology adoption, consistent with OECD evidence on place-based innovation policies, stakeholders highlighted that programme implementation should be flexible enough to adapt to regional specificities, while also acknowledging the importance of national programme guidelines and branding to ensure policy consistency and to signal policy priorities from the national government to the regional level (OECD, 2020[10]). From a budgetary perspective, it was suggested that while funding decisions should be national, spending decisions should be local to better address different regional needs, especially in an area like technology adoption where needs evolve rapidly.
Although regional organisations are mostly policy delivery agents in the United Kingdom, there was also a strong call from the regions for early and strategic involvement in policy design, with a view to ensuring better alignment between national policies and regional competitive advantages. In this respect, the new UK Modern Industrial Strategy was positively assessed, thanks to both its consultative process from an early stage and its support of regional clusters6, which is a policy whose inherent objective is aligning national economic priorities with regional industrial strengths.
Regional stakeholders also highlighted the need for national funding to better address regional economic imbalances in access to technology adoption support. Interestingly, this point was made across all three visited regions. On the one hand, there were concerns in less central regions about the continued prioritisation of the Golden Triangle (London, Cambridge and Oxford) in national innovation policies. On the other hand, it was also stressed that there are pockets of deprivation in more affluent regions like Greater London which nonetheless do not receive adequate regional development funding. To tackle this issue, it was suggested that regional funding should be linked to more granular development indicators, for example at borough or district levels, rather than at regional level. Stakeholders highlighted that transparency in criteria determining funding allocation would support the endorsement of national policies by regional authorities.
Regional stakeholders also expressed some concern about fragmentation in programme delivery. Regional combined authorities offered one route to address this problem, as valuable hubs not only of policy information but also of competencies in areas such as business support services and economic strategy-making that individual councils, especially in smaller cities and towns, would be less likely to have.7 Fragmentation in policy delivery was, therefore, deemed particularly harmful for small businesses located outside major metropolitan areas or combined-authority areas, as these companies might not receive the same type of support that others do.
Technology adoption in rural regions remains a challenge, reflecting a combination of factors, including infrastructure bottlenecks such as grid connectivity and broadband accessibility, skills constraints, limited access to finance and business support (OECD, 2025[11]). It is worth noting that, among these barriers, infrastructure gaps are being addressed through the UK Government’s 10-year Strategy on infrastructure, including measures to upgrade telecoms networks and close the digital divide (paragraphs 3.43 to 3.49) (HM Treasury and National Infrastructure and Service Transformation Authority, 2025[12]). In line with OECD territorial definitions, the term “rural” refers here to areas with low population density rather than only agricultural areas. Accordingly, “rural innovation” refers to any type of innovation and technology adoption in rural regions, and it does not necessarily refer only to innovation in farming or other primary sectors (Garcilazo, 2013[13]; OECD, 2018[14]).
There are strong variations in technology uptake not only across regions, but also within the same region in the UK; for example, in the West Midlands, the Black Country subregion performs modestly on innovation indicators (e.g., secured innovation funding and the value of received research funding) compared to other Midlands Local Enterprise Partnerships (LEPs) (West Midlands Combined Authority, 2020[15]). Nonetheless, stakeholders also flagged successful rural development initiatives, on which the UK government could build to further promote rural innovation nationwide. Two success stories are the Rural Design Centre, which is supported by the North-East Combined Authority (NECA), and the Rural Catalyst, which is sponsored by the North of Tyne Combined Authority (NTCA)8.
Multilevel governance arrangements
Multilevel governance arrangements in technology adoption policies are largely ad-hoc in the United Kingdom, that is, there are no standing consultation mechanisms between national and regional governments or between the public and private sector on this matter. Many stakeholders considered this model to work well in practice, with the consultative processes behind the Technology Adoption Review and the new Modern Industrial Strategy brought up as good examples. Nonetheless, some stakeholders expressed a mild dissatisfaction with the erosion of formal consultation mechanisms supporting long-term strategic dialogue, noting that this has reduced continuity for long-term strategic dialogue and made systematic follow-up more difficult.
Universities were generally viewed as key partners in innovation delivery. Nonetheless, these institutions also noted a lack of clear channels for contributing to national strategies. In response, some regional universities have set up liaison and communication offices which act as a single point of contact and information for national and regional development organisations like the combined authorities (Universities for North-East England).
At regional level, institutional collaboration mostly relies on informal networks, local initiatives, and personal relationships in relatively close-knit communities of practitioners. In the three visited regions this flexible approach was seen as capable of supporting responsive and context-sensitive collaboration, particularly when local stakeholders had the autonomy to shape programme delivery. Stakeholders also emphasised that such informal networks can be mobilised more effectively when support is designed and delivered at regional level, enabling better outreach to local firms and intermediaries that might otherwise not engage with national programmes.
Measuring the success of technology adoption programmes remains a contested issue. While some stakeholders underscored the strong evaluation culture of the United Kingdom as an asset, intermediary organisations in charge of programme delivery talked of “short-termism” in current monitoring and evaluation (M&E) practices, with long-term results like productivity improvements expected in too short a period of time. Furthermore, current evaluation approaches struggle to account for indirect economic impacts such as skills development, organisational change, or improved resilience that are nonetheless central to business change and success. This reflects methodological constraints rather than a lack of interest in these outcomes.
International practices can offer some insights in this regard. New Zealand’s Digital Boost evaluation relies on repeated survey waves of participating SMEs, which include self-reported indicators such as perceived business resilience and time savings (New Zealand's Ministry of Business Innovation and Employment, Digital Boost Evaluation Research[16]). Canada’s Industrial Research Assistance Programme (IRAP) has been evaluated through a comprehensive mixed-methods approach, combining data and document reviews, interviews, case studies, a client survey, focus groups with industrial technology advisors, “journey mapping” of unfunded firms, an international comparison, and a partial cost-benefit analysis. This design enabled the evaluation to go beyond short-term outputs and assess wider effects such as SMEs’ improved innovation capacity, greater access to support ecosystems, and accelerated growth trajectories (Canada's Ministry of Innovation, Science and Economic Development, 2022[17]).
Improving the quality and scope of data collection was also identified as a priority, something which has also been referred to in the work of the UK SME Digital Adoption Taskforce (Department for Business and Trade, 2025[18]). National digital adoption surveys can help address this gap, including by collecting and monitoring information by region, sector and firm size9. In the United States for example, the Manufacturing Extension Partnership (MEP) has been evaluated through both independent and internal assessments, including recurrent longitudinal client surveys, which track impacts on investment, sales and employment annually over more than three decades10. In the Netherlands, evaluations of innovation voucher schemes have leveraged randomised assignment (lottery) together with data linkage to Statistics Netherlands’ firm performance records, creating a dataset that supports causal inference on collaboration, R&D intensity, and long-term firm performance (Innovation Growth Lab, 2020[19]). Germany’s Fraunhofer Institute pairs a stable Key Performance Indicator (KPI) backbone with rich microdata. Its annual reports publish consistent indicators (e.g., business volume and the contract-research share), while research teams merge internal project records with official firm surveys, such as the German Manufacturing Survey, so evidence can be presented according to different dimensions such as firm size, sector and region (Fraunhofer Institute, 2022[20]).
Policy focus
Stakeholders underscored that the United Kingdom performs well in early-stage research up to the phase of prototype development, while it does less so when it comes to research commercialisation and scaling, which is a critical step for the wider diffusion of new technologies. This has also been presented in terms of technology readiness levels (TRLs), suggesting that the United Kingdom has a good support system up to TRL 6-7, while it is weaker at the final stages of TRL 8-9 (see Figure 3.1). As highlighted in recent policy work, it is through commercialisation that firms package new technologies into standard products and services, build distribution and support channels, and lower perceived risks for users, thereby making adoption feasible for a much broader set of businesses (Bauer, Sisto and du Roy, 2024[21]; EIT, 2021[22]). In other words, while early-stage R&D is well supported, including in its collaborative forms, there are fewer mechanisms to help firms grow, scale, and access markets, such as support for demonstration, validation, and customer acquisition (i.e., what some described as the “procurement phase”). Public procurement and test-and-learn approaches were considered important to address this commercialisation gap. It was also suggested that public support measures at TRL 8-9 level should have a longer and more spaced timeframe than those at TRL 6-7, to better reflect the different nature of research commercialisation and prototype development. Some Catapults are already going in this direction, experimenting with lifecycle engagement models and emphasising the value of alumni support, reintegration mechanisms, and follow-on services.
Source: (Innovate UK, 2025[23])
This “early-stage” bias was also observed in business support policies, with many stakeholders arguing that the United Kingdom provides adequate support for start-ups, but less so for scale-ups. This has been a recurring theme in the national policy landscape in the last years, as the United Kingdom, as much as the rest of Europe, has struggled to generate the same number of “unicorns” (i.e., unlisted companies valued more than USD 1 billion) than the United States. Support for scale-up is often mentioned in the new UK Modern Industrial Strategy but has also informed past policies such as the 2017 Patient Capital Review (UK Government, 2017[24]). Scale-up policies typically include, among other things, late-stage venture capital (VC) funds, management skills development, access to markets, and access to professional networks.
Stakeholders also observed that UK innovation policies are mostly focused on supply-side measures, particularly financial support, rather than demand-side measures that strengthen SMEs’ capabilities to adopt and use technologies (e.g. skills, management capability and advisory support). Stakeholders noted that other supply-side levers, such as taxation of digital investment, financial regulations, and planning rules, as well as demand-side tools such as public procurement, also shape the environment in which SMEs make technology decisions. This also translated into some institutions expressing concerns about too strong an emphasis on grant-based support, which may encourage short-term grant-seeking behaviour and weaken incentives for long-term investments. To tackle this problem, it was suggested that more emphasis should be placed on demand-side measures, especially skills development and advice. This view was also reflected in the appreciation of programmes like “Help to Grow: Management” (HtGM) and “Made Smarter”, which respectively provide management skills and tailored advice.
More specifically, stakeholders emphasised three main points on skills development. First, both managerial skills and workforce skills are important for technology adoption at firm level. Senior managers are those effectively making technology adoption decisions, which requires not only technical understanding but also a willingness to change established practices and strategies. However, technology adoption also mostly takes place on the shop floor, suggesting that the skills of mid-level managers and workers are also important. This is especially true in smaller companies, where the cognitive distance between managers and workers is shorter. Ultimately, successful adoption depends not only on technical capacity but also on organisational culture, with managers able to lead change and secure the active engagement of the workforce.
Second, stakeholders underlined the importance of moving from one-off training to continuous learning to stay abreast of rapidly evolving digital technologies. As a result, long-term training resulting in traditional qualifications was often considered obsolete, while there was a strong call for more agile training frameworks built around short, industry-led training modules delivered by accredited providers. In this respect, several stakeholders called for a reform of the national apprenticeship levy scheme to enable its use for shorter training programmes better aligned with business needs. The UK government has recently announced plans to replace the Apprenticeship Levy with a Growth and Skills Levy, which should allow levy funds to support a wider range of training beyond apprenticeships, including shorter courses in areas such as digital skills and AI. It is worth noting that some countries, including neighbouring Ireland, have experimented with the development of micro-credentials to deliver skills more rapidly in areas of high and immediate demand in the labour market, something that the United Kingdom could also consider. In Ireland, this has been pursued through university-led initiatives, such as MicroCreds, where accredited universities design and deliver short modules informed by employers.
Third, the development of a strong pipeline of future digital talent was also highlighted as a long-term priority. Stakeholders stressed the importance of embedding digital skills and aspirations from an early age; the Birmingham Digital Futures programme was offered as an interesting example. These programmes aim to build technology awareness and competences from primary school, helping to develop a more digitally savvy workforce over time. The new UK TechFirst initiative, which is part of the UK Modern Industrial Strategy, goes in this direction, as it includes a component on digital skills development for one million secondary-school students.
Finally, financial institutions reported that the financing market is changing in response to digitalisation. While asset-based financing has traditionally focused only on hardware, there has more recently been a shift towards a mixed model in which funding decisions consider both hardware and software assets, reflecting the growing integration of digitalisation in the production process. Partnerships, such as the MTC – Lloyds Bank SME Support Service (see Box 3.2), illustrate existing attempts to combine technical appraisal of digital projects with tailored finance offers that can better accommodate software and service components alongside physical assets. Nonetheless, bank lending only based on software or for software-only investments remains rare, as some degree of physical assets is still required as part of collateral (Brassell and Boschmans, 2019[25]).
Policy design and delivery
A major issue that emerged in the consultation process is the trade-off between the outreach and intensity of support. Stakeholders reported most satisfaction with time-intensive programmes such as tailored advisory services, capacity-building, and account management systems (Scotland) which, also in the empirical literature, are found to have bigger impacts on business performance than shorter and finance-only interventions. UK specific examples of this approach include the network of Catapults and Made Smarter. However, due to the intensity (and cost) of this support, these measures can only reach a relatively small number of companies, which are already generally positively inclined towards innovation and technology adoption. The “additionality” and overall impact on the economy of these measures can be, therefore, sometimes questioned.
Some stakeholders, especially at national level, strongly supported this more intensive, targeted model of support, arguing that national innovation policies should focus on those companies where technology adoption has the greatest potential impact on productivity growth. In a similar vein, some institutions noted that digital adoption often correlates with firms already seeking to grow or attract investment, rather than digital “outliers” operating from a low technology baseline. From this perspective, an important productivity growth channel at the bottom of the technology pyramid is the natural entrepreneurial churning process by which unproductive firms are replaced by new more productive ones.
However, views from regions, especially from the North-East and the West Midlands, were somewhat different, stressing the importance of a more inclusive approach to technology adoption that also covers small businesses which have low digital awareness and capacity, and which are away from the technology frontier of their industry. These firms often lack the time, knowledge, or internal systems to engage with more structured support offers and yet represent the large majority of SMEs. UK policy examples of this inclusive approach include the national network of “Business & IP Centres” (BIPC) of the British Library and the “Digital Pathfinder” scheme in the North-East. The BIPC centres offer information on intellectual property, business creation and business growth for both existing and would-be entrepreneurs. They also operate specific interventions like the “Get Ready for Business Growth Programme”, a twelve-week intensive programme for companies with turnover of at least GBP 80 000. A high rate of BIPC users comes from underrepresented groups in the entrepreneurial population (i.e., women, youth and ethnic minorities), making them an example of inclusive entrepreneurship policy. The Digital Pathfinder is a regional programme that offers twelve hours of advice on digital technologies to small businesses in the so-called “foundational economy”, which includes mostly local and non-tradable sectors such as care and health services, food, housing, energy, construction, tourism and retail trade. In this regard, some stakeholders also emphasised the value of looking at SME technology adoption as a structured journey along different levels of technology maturity. In doing so, different policy responses are needed along different levels of technology maturity, thus effectively calling for an inclusive approach to technology adoption policies.
As noted earlier, many stakeholders lamented a high degree of fragmentation in policy delivery, especially in grant support. Nonetheless, few thought that one-stop shops, whether online or brick-and-mortar, would be a viable solution to fully address this issue, since different SMEs have different needs which are better addressed by different institutions. It was argued, for example, that small companies in retailing or other services are better served by the network of Business Growth Hubs, under the responsibility of the Department for Business and Trade, while technology-based companies would naturally look to Innovate UK (IUK) as the main reference point, in particular IUK Business Growth for tailored business advice, and IUK Business Connect to build collaborations and networks across academia, industry and other partners. The idea of an online one-stop shop acting as a repository of institutional and programme websites received particularly strong scepticism as something unable to play a real signposting and steering role for small companies.
Conversely, multi-year programme funding was considered a possible answer to policy fragmentation and a means to encourage longer-term technology investments. While government budgets are annual, multi-year programme funding is possible by earmarking a specific share of government budget or revenue for a given policy purpose. Recent UK government guidance on awarding ten-year R&D funding provides a framework for departments and arm’s-length bodies to commit long-term budgets to selected key R&D organisations and programmes where shorter funding cycles would constrain infrastructure, talent development or partnerships with industry (Department for Science, Innovation & Technology, 2025[26]). Internationally, in the United States, federal agencies undertaking R&D must set aside 3.2% of their extramural R&D budget for the Small Business Innovation Research (SBIR) policy and 0.45% for the Small Business Technology Transfer (STTR) policy, both of which have ensured continued R&D funding for SMEs over the years. At operational level, multi-year funding can take a modular approach, where annual enterprise funding is subject to the achievement of certain development milestones and where funding size can change by year depending on the nature of the project (i.e., some projects may require larger upfront investments whereas others may demand an ascending amount of funding support).
On the funding side, there were concerns about the sustainability and delivery of innovation funding. Notably, the UK Shared Prosperity Fund (UKSPF), established to replace the European Regional Development Fund (ERDF), is due to end in March 2026. Managers of some programmes funded through UKSPF voiced concerns about the ability to maintain the same volume of activities beyond this date. UKSPF funding has supported, for example, the British Library’s Business & IP Centres network and the Digital Pathfinder scheme. However, the UK government has recently announced that the UKSPF will be replaced by the Local Growth Fund from April 2026. In England, the Local Growth Fund is worth GBP 901 million over four years (from 2026-27 to 2029-30), targeted at 11 Mayoral Strategic Authorities, with a focus on infrastructure investment, business support and skills development. UKSPF allocations in 2025-26 totalled GBP 902 million across the UK, including GBP 571 million in England (Ward, 2025[27]). Taken together, these announcements reinforce the importance of predictable, long-term funding to avoid stop-and-go cycles. With regard to the delivery of innovation funding, some regional stakeholders expressed frustration with how funding mechanisms are structured, describing them as overly centralised and fast-paced (due to tight deadlines), with competitive processes that do not place all regions on an equal footing. It was argued that these features penalise less developed regions with more limited institutional capacity, while favouring larger, better-resourced firms in more developed regions.
Finally, some stakeholders were concerned about rigid programme design in the case of specific schemes, such as the apprenticeship levy and the R&D tax credit. The apprenticeship levy – now set to be replaced by Growth and Skills Levy – was criticised for its rigid eligibility rules, minimum duration requirements, and narrow focus on formal qualifications. It was reported that employers are unable to use levy funds for modular or on-demand learning formats, which are often more appropriate for rapidly evolving digital skills. As a result, many firms, especially SMEs, find it difficult to align levy-funded training with their operational needs, leading to an underutilisation of the funds. As to the national R&D tax credit, different stakeholders called for reforms to improve the predictability and administrative efficiency of the scheme. Suggested proposals included advanced project clearance to provide companies with greater certainty on the approval of the tax credit, moving the responsibility for project evaluation from the national tax agency (i.e., HM Revenue and Customs, HMRC) to innovation policy authorities (e.g. UKRI), and the inclusion of capital expenditures and digital infrastructure in the list of eligible expenses. Some stakeholders also advocated for higher minimum expenditure thresholds to reduce the administrative burden on HMRC; however, this change would have negative consequences for SMEs that are more likely than others to claim small R&D expenses.
Specific programmes and initiatives
The consultation process also touched on specific programmes and initiatives, some of which have already been mentioned in the previous section as examples of broader trends (e.g., the apprenticeship levy and the R&D tax credit scheme).
Stakeholders welcomed the sector-focused approach to industrial policy of the newly released UK Modern Industrial Strategy. Elements of the Strategy which were particularly appreciated include the expanded role of the British Business Bank, digital skills development through the TechFirst initiative, talent attraction measures, and the creation of local innovation partnership funds. The Strategy’s alignment with regional development priorities and strengths and the consultation process behind it were also strongly valued.
Catapults
With respect to specific programmes, the Catapults were widely regarded as the main UK R&D and innovation policy supporting industry-university collaboration, including SMEs. A 2023 review by the UK government re-affirmed the Catapults’ role in strengthening regional R&D capacity, enhancing productivity, and contributing to national growth and regional development, putting forward thirteen specific recommendations for the Centres to continue to contribute to innovation in the United Kingdom (Department for Science, Innovation and Technology, 2023[28]). Stakeholders discussed the current “one-third funding model” of the Catapults – i.e., one-third of core government grants, one-third from commercial funding (private research contracts) and one-third from collaborative R&D funding (through competitive application processes) – and expressed concerns about its long-term sustainability in the context of potential shifts in the balance between national and devolved R&D funding. Some stakeholders, especially from regions, also advocated for a larger role for the Catapults in supporting small business technology adoption, but others (including business representatives) suggested that this would dilute the mission and scope of their work, which should remain focused on R&D and technology development. Some stakeholders noted that the Catapults would be the right organisation to support research commercialisation efforts at TRL 8-9 level (see above), but that this would also require more funding, which is currently difficult to come from national budget sources. Catapults themselves reported challenges in meeting demand from smaller, less innovation-ready firms and in maintaining continuity of support once initial programmes end, reflecting wider resourcing and capacity constraints. There was also a call to strengthen collaboration between Catapults on projects of mutual interest (in line with the 2023 Review’s suggestions), while an expansion in the number of centres to cover more technologies or regions was not considered a priority. In fact, although each centre is headquartered in a specific city and region, most stakeholders agreed that their outreach is generally nationwide, as they collaborate with companies and institutions from other regions, including through the presence of satellite offices.
Made Smarter
Made Smarter was another programme praised for its hands-on and case-driven approach, combining tailored advice with funding and training. Originating from the 2017 “Made Smarter Review”, the programme aims to establish UK manufacturing as a global leader in industrial digital technologies through leadership training, peer learning, executive development and grants, the latter given under the framework of the Made Smarter Innovation Challenge (2020-2025). Originally piloted in the North-East and London for the manufacturing sector, the programme has since been expanded nationally and into professional business services (i.e., consulting, legal advice, marketing and IT solutions catering to the business sector). In this respect, some stakeholders disagreed with the sectoral expansion of the programme and favoured the original manufacturing focus.
The success of this programme has generally been ascribed to its trusted, flexible, and one-to-one advisory model. This has also meant that implementation at regional level takes different forms. In the West Midlands, delivery is shaped by regional assets such as High Value Manufacturing Catapult (HVMC) Centre and a strong industrial base. In the North-West, support is differentiated by staff level (e.g. separate training for managers and workers), while in the North-East, training is not segmented by staff type due to resource constraints.
Help to Grow: Management and Digital
Stakeholders also expressed positive views of the “Help to Grow: Management (HtGM)” programme, a government-backed 12-week executive development course catering to SME senior leaders which is delivered across a network of accredited business schools. This is consistent with evidence from a recent evaluation study, showing that SME leaders who have completed the programme report high levels of satisfaction, are more confident in their ability to achieve their goals, have expanded their peer networks and have improved performance outcomes such as sales and employment (self-reported outcomes) (UK Government, 2024[29]).
In contrast, the “Help to Grow: Digital” (HtGD) programme (i.e., a voucher scheme for the acquisition of digital technologies), as noted earlier, faced 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 allowed in the use of vouchers, the narrow range of software on offer and a need for greater government communication about the scheme. The programme’s duration was also deemed too short to build awareness and trust in the SME community, which relates to the common issue of very tight programme spending timelines.
The negative experience with the HtGD programme seems to have introduced a negative perception of vouchers, which have generally been considered ill-placed to achieve long-term change in technology adoption and innovation. This can also be observed in the preference for more time-intensive interventions like “Made Smarter” and the HtGM programme. However, the experience of other countries with vouchers is more mixed, suggesting that this option, which is simple and can reach many small businesses at once, should not be ruled out too quickly. In the Netherlands, for example, innovation vouchers, which were assigned randomly to applicant firms through a lottery, had a long-term impact on recipients which, compared to non-beneficiaries, showed better short- and long-term performance across different performance metrics (e.g., higher survival rate, more R&D spending, greater job creation and higher labour productivity) (Innovation Growth Lab, 2020[19]). Furthermore, some countries (e.g. Canada and Sweden) have started to experiment with new types of vouchers, notably multi-staged vouchers, which allow first-time recipients to apply again for a second, generally larger voucher, to implement the initial feasibility study or scale up the original innovation or technology backed by the first voucher.
Regulatory levers
Finally, regulatory levers were increasingly seen as part of the digital adoption agenda. Reforms related to e-invoicing, digital taxation, and procurement were considered having the potential to lower administrative barriers for SMEs and to indirectly favour internal demand for digital technologies. Some stakeholders also highlighted the role of international standards organisations, such as ISO, in supporting diffusion, noting that standards which incorporate digital requirements can help shape demand for new technologies and related skills. From this perspective, programmes that help SMEs understand and use such standards, for example by aligning training with recognised standards, were seen as another lever to support technology adoption. However, stakeholders stressed the importance of balancing compliance requirements with appropriate support. A “carrot and stick” approach was recommended: leveraging public sector digital transformation to set standards while providing sufficient guidance, timelines, and support tools for SME compliance. Larger firms involved in the consultation process echoed this view, warning that without adequate support regulatory changes risk creating frictions rather than enabling technology diffusion.
References
[21] Bauer, M., E. Sisto and O. du Roy (2024), Enhancing Technology Diffusion in the EU amid Tough Structural Challenges, https://ecipe.org/wp-content/uploads/2024/09/ECI_OccasionalPaper_05-2024_LY06.pdf.
[5] Bianchini, M. and M. Lasheras Sancho (2025), “SME digitalisation for competitiveness: The 2025 OECD D4SME Survey”, OECD SME and Entrepreneurship Papers, No. 68, OECD Publishing, Paris, https://doi.org/10.1787/197e3077-en.
[25] Brassell, M. and K. Boschmans (2019), “Fostering the use of intangibles to strengthen SME access to finance”, OECD SME and Entrepreneurship Papers, No. 12, OECD Publishing, Paris, https://doi.org/10.1787/729bf864-en.
[17] Canada’s Ministry of Innovation, Science and Economic Development (2022), Evaluation of the NRC’s Industrial Research Assitance Program: Summary Report, https://nrc.canada.ca/en/corporate/planning-reporting/summary-report-evaluation-nrcs-industrial-research-assistance-program.
[3] Department for Business & Trade (2025), Backing your Business: Our Plan for Small and Medium Sized Business, https://assets.publishing.service.gov.uk/media/688b1f6f1affbf4bedb7b11d/our-plan-for-small-and-medium-sized-businesses.pdf.
[18] Department for Business and Trade (2025), SME Digital Adoption Taskforce: Final Report, https://assets.publishing.service.gov.uk/media/688a43d0b223ff124d388903/sme-digital-adoption-taskforce-final-report.pdf.
[4] Department for Business and Trade (2024), Help to Grow: Digital - Evaluation Report, https://www.gov.uk/government/publications/help-to-grow-digital-evaluation-report.
[6] Department for Science, Innovation & Technology (2026), AI Adoption Research, https://www.gov.uk/government/publications/ai-adoption-research/ai-adoption-research#barriers-to-ai-adoption-1.
[26] Department for Science, Innovation & Technology (2025), Guidance: Awarding ten-year R&D funding, https://www.gov.uk/government/publications/awarding-ten-year-rd-funding-guidance-for-departments-and-albs/awarding-ten-year-rd-funding.
[1] Department for Science, Innovation and Technology (2025), Technology Adoption Review: 2025, https://www.gov.uk/government/publications/technology-adoption-review.
[2] Department for Science, Innovation and Technology (2025), The UK’s Modern Industrial Strategy 2025, https://www.gov.uk/government/collections/the-uks-modern-industrial-strategy-2025.
[28] Department for Science, Innovation and Technology (2023), 2023 Update to the ’Catapult Network Review’, https://assets.publishing.service.gov.uk/media/6503184897d3960014482f14/catapult-network-review-2023-update.pdf.
[22] EIT (2021), What Works? Commercialisation and Technology Transfer, https://europoshorizontas.lt/wp-content/uploads/2023/09/Commercialisation-and-Technology-Transfer-processes.pdf.
[20] Fraunhofer Institute (2022), A microeconomic perspective on the impact of the Fraunhofer-Gesellschaft, https://www.fraunhofer.de/en/research/range-of-services/impact-of-fraunhofer-research.html.
[13] Garcilazo, E. (2013), “Growth Trends and Characteristics of OECD Rural Regions”, OECD Regional Development Working Papers, No. 2013/10, OECD Publishing, Paris, https://doi.org/10.1787/5k4522x3qk9q-en.
[12] HM Treasury and National Infrastructure and Service Transformation Authority (2025), UK Infrastructure: A 10 Year Strategy, https://assets.publishing.service.gov.uk/media/6853c5db99b009dcdcb73649/UK_Infrastructure_A_10_Year_Strategy_Web_Accessible.pdf.
[23] Innovate UK (2025), Innovate UK Catapult Network: Catapults at the heart of the UK’s Innovation Ecosystem, https://catapult.org.uk/wp-content/uploads/2025/02/Catapult-Network-Prospectus-Spring-2025-DIGITAL.pdf.
[19] Innovation Growth Lab (2020), The long-term impact of Dutch innovation vouchers: Back to the future with randomised controlled trials, https://www.innovationgrowthlab.org/blog/long-term-impact-dutch-innovation-vouchers-back-future-randomised-controlled-trials.
[16] New Zealand’s Ministry of Business Innovation and Employment (Digital Boost Evaluation Research), 2023, https://www.mbie.govt.nz/dmsdocument/28515-full-report-the-benefit-of-being-part-of-the-digital-boost-programme-wave-3-june-2023.
[11] OECD (2025), Rural Innovation Pathways: Connecting People, Places and Ideas, OECD Rural Studies, OECD Publishing, Paris, https://doi.org/10.1787/c86de0f4-en.
[10] OECD (2020), Broad-based Innovation Policy for All Regions and Cities, OECD Publishing, Paris, https://doi.org/10.1787/299731d2-en.
[14] OECD (2018), “Rural 3.0: A Framework for Rural Development”, OECD Regional Development Papers, No. 93, OECD Publishing, Paris, https://doi.org/10.1787/618f702b-en.
[7] Skare, M. and D. Riberio Soriano (2021), “How globalization is changing digital technology adoption: An international perspective”, Journal of Innovation & Knowledge, Vol. 6/4, pp. 222-233, https://doi.org/10.1016/j.jik.2021.04.001.
[8] Sweeney, E., A. Taschner and H. Grünewald (2020), “Disruptive digital technology adoption in global supply chains”, Journal of Supply Chain Management, Logistics and Procurement, Vol. 3/1, p. 77, https://doi.org/10.69554/nfbv5572.
[9] Tony Blair Institute (2025), Rebooting the UK’s Tech-Diffusion Ecosystem to Drive Growth, https://institute.global/insights/economic-prosperity/rebooting-the-uks-tech-diffusion-ecosystem-to-drive-growth.
[29] UK Government (2024), Evaluation of Help to Grow: Management - End of Year 3 Interim impact evaluation, https://assets.publishing.service.gov.uk/media/679cf4903f28b7444270a35d/help-to-grow-management-end-of-year-three-evaluation-report.pdf.
[24] UK Government (2017), The Patient Capital Review, https://www.gov.uk/government/publications/patient-capital-review.
[27] Ward, M. (2025), Local growth funds, https://researchbriefings.files.parliament.uk/documents/CBP-9460/CBP-9460.pdf.
[15] West Midlands Combined Authority (2020), State of the Region 2020: Final Full Report, https://www.wmca.org.uk/media/1gcp3qyg/state-of-the-region-2020-final-full-report.pdf.
← 1. The Strategy focuses on eight priority sectors that are expected to have the greatest impact on productivity growth in the United Kingdom: Advanced Manufacturing, Clean Energy Industries, Creative Industries, Defence, Digital and Technologies, Financial Services, Life Sciences, and Professional and Business Services.
← 2. The UK’s Modern Industrial Strategy intends to make the United Kingdom an AI maker rather than only an AI taker and estimates that AI innovation alone could alone add up to GBP 47 billion a year for the UK in productivity gains over the next decade. AI Growth Zones have been announced to fast-track AI infrastructure development, support planning approvals, and unlock access to energy. Furthermore, the TechFirst initiative is expected to train up to 7.5 million workers in essential AI skills by 2030.
← 3. For example, a company that has implemented a chatbot to automate customer service could share practical lessons with a company exploring digital tools for supply chain management or waste tracking, enabling cross-sector exchange of applied knowledge in a way that advisory bodies alone may not be able to replicate.
← 4. In the context of the fact-finding mission, the OECD met with several intermediary organisations (see Annex), such as the Manufacturing Technology Centre (MTC), the Tech West Midlands (TWM) or Sunderland Software City (SSC).
← 5. It should be noted, however, that these stakeholders were not involved into university-led programmes such as “Help to Grow: Management”, which is delivered through a large network of university business schools.
← 6. Support for regional clusters in the UK Modern Industrial Strategy will take different forms, including the support of Industrial Strategy Zones (Investment Zones and Freeports), a Local Innovation Partnership Funds, and new AI Growth Zones.
← 7. For example, the North-East Combined Authority (NECA) has taken a convening active role by bringing together large firms, colleges, and universities through platforms like the Regional Business Forum.
← 8. These not-for-profit organisations offer design-led collaboration workshops, business support for early-stage rural ventures, as well as a space to pilot and test emerging technologies in real settings. Both centres also organise knowledge-sharing events and contribute to applied research on place-based innovation, helping rural SMEs overcome barriers such as digital infrastructure gaps, limited access to services, and low visibility in national policy frameworks.
← 9. The EU’s Digital Economy and Society Index (DESI) is an example.
← 10. Further information is available in the programme case study concerning the Manufacturing Extension Partnership programme from the United States.