SME Technology Adoption in the United Kingdom

4. Suggested policy measures for the United Kingdom

Abstract

This chapter presents fifteen suggested policy measures aimed at strengthening SME technology adoption in the United Kingdom, building on the analysis of the previous chapters. The measures are organised around three complementary pillars: technology adoption, skills development, and the regional dimension. Several cross-cutting insights inform the proposed measures. First, financial support is likely to be more effective when combined with skills development and advisory support, particularly for SMEs facing organisational and managerial barriers to technology adoption. Second, peer learning and intermediary organisations are central to effective technology diffusion, as they help firms navigate available support and build trust in technology solutions. Third, wider technology diffusion requires an inclusive approach that reaches firms beyond high-tech sectors and priority industries. Finally, the suggested measures highlight the importance of combining national strategic direction and branding with sufficient flexibility to adapt programmes to different regional contexts.

Introduction

Building on the analysis presented in the previous chapter, this chapter presents fifteen policy proposals aimed at enhancing SME technology adoption in the United Kingdom. These policy proposals have been presented and tested with the same national and regional stakeholders who were met in the first consultation process (July 2025) during a second round of meetings (October 2025). The fifteen policy proposals are organised around the three complementary categories of technology adoption, skills development and the regional dimension, which are also at the core of key government strategy documents such as the UK Modern Industrial Strategy and the UK SME Strategy “Backing your Business”.

There are some common threads across the fifteen policy proposals. First, there is an increasing recognition that financing support has stronger impacts when it is combined with skills development support, suggesting that measures which combine these two elements are better suited to foster technology adoption. Second, in the context of skills policies for small businesses, the importance of peer learning cannot be underestimated. Entrepreneurs take insights from other entrepreneurs facing similar challenges more seriously than theoretical management training, giving further directions on ideal technology adoption policies for SMEs. Third, intermediary organisations act as a fundamental bridge between the government and the private sector. Universities and other research organisations are particularly valued in the sphere of high-tech projects, while other intermediaries like technology centres or chambers of commerce can play an important role in the lower-tech spectrum of technology adoption, translating research into practical business applications or simply helping SMEs navigate the system of public support. Fourth, linked to the previous point, technology diffusion clearly requires an inclusive policy approach that also encompasses SMEs in low-tech sectors and sectors that are different from the eight prioritised in the UK Modern Industrial Strategy. In fact, trickle-down effects from high-tech to low-tech are unlikely to be strong enough to meet the technology diffusion objectives of the UK government. Finally, there needs to be flexibility in policy design so that programmes can be adapted to different regional contexts. However, stronger national branding, which would include the design of some core activities identical across UK regions, may be warranted to boost awareness among business owners and mutual learning between regions. Box 4.1 presents the list of suggested policy measures which are further detailed in the rest of this chapter.

Box 4.1. Suggested policy measures for the UK government

Technology adoption

1. Simplify the national R&D tax credit system and include preferential conditions for SMEs and collaborative R&D.

2. Position “Made Smarter” as the national programme for small manufacturing upgrading.

3. Support an inclusive approach to digital adoption by strengthening the digital component of the business growth hubs.

4. Design a staged approach in the implementation of voucher schemes.

5. Develop an introductory AI policy (AI package) for SMEs.

6. Strengthen the commercialisation dimension of the Catapults.

Skills development

7. Support digital skills development both in the student and adult-age population.

8. Build on the Growth and Skills Levy and develop micro-credentials to more rapidly address new skills demands in the labour market.

9. Support peer learning through a theme-focused network approach (e.g., energy efficiency networks, digital skills networks, etc.).

10. Develop a new management-skills pathway within HtGM to support hands-on technology adoption projects.

11. Use business succession and catalogues of accredited tech solutions as further levers to enhance SME tech adoption.

Regional & governance dimensions

12. Draw on past cluster policy experiences to implement the new local innovation partnership funds.

13. Launch a national rural tech adoption programme.

14. Strengthen collaboration and learning across local areas in technology adoption policies.

15. Develop a technology adoption survey to design better-informed policies.

Some of the policy measures are closely related and can be implemented either as a coherent pathway or on a stand-alone basis. For example, measures 3 to 5 address successive steps in the SME adoption journey and are designed to be mutually reinforcing: Business Growth Hubs can operate as the main entry point, vouchers can help de-risk implementation, and the SME AI package can provide a targeted module for firms interested in the adoption of cutting-edge technologies. However, if implemented as separate programmes with distinct brands, application routes and eligibility rules, these measures could add to fragmentation rather than reduce it. At the same time, each of these measures could also be pursued independently, although this would still require a shared delivery mechanism to reduce possible fragmentation for SMEs, for example, through the Business Growth Hubs acting as the main entry point and applying the same delivery process with shared data across programmes. This would ideally be complemented by a periodic portfolio review to map overlaps, simplify the offer and, where relevant, consolidate instruments and phase out duplicative programmes.

Technology adoption

1. Simplify the national R&D tax credit system and include preferential conditions for SMEs and collaborative R&D

Rationale

R&D can support technology adoption by enabling firms to adapt, refine and integrate existing technologies to their operational needs, thereby bridging the gap between generic solutions and effective implementation. In particular, collaborative R&D between firms and research organisations can facilitate the translation of university-developed technologies into business applications by supporting incremental development, testing and tailoring in real-world settings.

By international comparison, the United Kingdom has a very generous public support system of business R&D. R&D tax credits and grants combined accounted for 0.47% of GDP in 2021 (the latest year for which data are available for all benchmarked countries), much higher than the OECD average (0.21%), but also than other large economies such as France (0.42%) and the United States (0.24%). The balance between tax credits and grants is especially tilted towards the former in the United Kingdom – nearly 70% of government business R&D funding takes the form of tax credits, the rest being grants – thus underscoring the importance of R&D tax credits in the UK innovation policy landscape.

An OECD indicator of R&D tax credit generosity (i.e., the implied tax subsidy rates on R&D expenditures) additionally shows that, on average, the generosity of the UK scheme is very much in line with the OECD and EU average, although it is less supportive than similar programmes in other large or neighbouring economies such as Canada, France, Germany and Ireland. The same indicator also shows that the UK R&D tax credit scheme offers the same conditions to large companies and SMEs regardless of whether they are making profits or experiencing losses1. Reforming the scheme so that it gives better conditions to SMEs (compared to larger companies) would go in the direction of making R&D tax credits more conducive to innovation diffusion. For example, some countries, like Canada, give better R&D tax credit rates to SMEs than to large companies (see below).

A change in this direction would be especially relevant in light of the mixed evidence on the effectiveness of the UK R&D tax credit scheme for SMEs. Official HMRC evaluations of both the SME R&D tax relief and the R&D Expenditure Credit (RDEC) find that tax reliefs do stimulate additional private R&D, but with lower additionality for the SME scheme than for the RDEC scheme2 (Devnani, Ladher and Robin, 2020[1]; Scott and Glinert, 2020[2]). However, recent independent impact evaluation finds that the UK R&D tax credit programme is significantly associated with increased product and process innovation among UK SMEs, spanning both incremental and radical innovations (Liu, Cowling and Zhang, 2025[3]). This study also finds that R&D tax credits are most impactful when firms also access external advice, pointing to the importance of management skills and advisory services such as those offered by programmes such as Made Smarter and Help to Grow Management in the United Kingdom. However, the positive effects of the tax credits on innovation outcomes do not occur immediately, which suggests the need for policy certainty (i.e. simple rules that do not change too often) and appropriate impact metrics, especially in the short-term, to avoid that lagged innovation outcomes be misread as a proof of lack of impact. Finally, the study shows that only 2.4% of UK SMEs accessed R&D tax credits, compared with 7.7% engaging in radical product innovation and 3.2% in radical process innovation, which suggests that many SMEs might benefit from the policy, but face barriers. One of these barriers, as emerged from the consultation process, might be the administrative complexity of the UK R&D tax credit policy, as well as the related uncertainty surrounding the approval and disbursal process (see chapter 3).

R&D tax credits are complementary to other diffusion tools. They primarily support firms’ R&D and innovation efforts, whereas wider adoption among non-R&D performing SMEs typically requires dedicated advisory, finance and implementation support. Recent evidence also suggests that R&D tax credits can generate technology spillovers to non-recipient peer firms, consistent with an indirect diffusion channel, although this is not a substitute for dedicated adoption support (Byun, Oh and Xia, 2023[4]).

Proposal

Against this background, it is suggested that the UK government:

• Simplify the administration of the R&D tax credit scheme, for example through advanced project clearance to provide companies with greater certainty on the approval of the tax credit.

• Make the scheme more supportive of R&D by SMEs. Since 2024, the new R&D tax credit policy of the United Kingdom provides a 20% above-the-line taxable credit. In practice, this delivers a net benefit of 16.2% of qualifying R&D expenditure for small profit rate payers and loss-making companies, and 15% for main rate profit makers, regardless of firm size3.

• Make the scheme more supportive of collaborative R&D, including through the provision of enhanced tax credit rates for collaborative R&D projects which see the involvement of public research organisations (including the Catapults, but also beyond), universities, and private-sector companies, notably SMEs.

Canada’s Scientific Research & Experimental Development (SR&ED) programme provides an example of an R&D tax credit policy which offers preferential conditions to SMEs. In the Canadian Programme, SMEs enjoy an R&D tax credit of 35% on the first CAD 3 million of qualifying expenditure, as against the 15% benefitting large companies. Furthermore, in the loss-making scenario, SMEs can claim cash-refunds, whereas large companies can only offset tax liability for the following 20 years (carry-forward) or up to 3 years before (carry backward). In 2021, the programme doled out CAD 3.85 billion in investment tax credits to nearly 24 000 companies4. Each year, on average, 75% of beneficiaries are SMEs, which absorb slightly more than half of total investment tax credits5.

Canada is not the only country to extend preferential conditions to SMEs in its R&D tax credit policy. Korea also has an R&D tax credit policy which is especially favourable to SMEs, which receive a 25% tax credit on R&D expenses, as against the 2% on incremental R&D spending which large companies receive. In Europe, France also has better conditions for R&D performing SMEs, as they can claim an additional 20% tax credit on innovation expenses (e.g. prototypes and pilot projects) beyond the 30% standard R&D tax credit available to all companies (up to the threshold of EUR 100 million).

Many countries have also experimented with special programmes and provisions which further support collaborative R&D, with a view to bridging the gap between industry and research and getting more small companies involved in R&D activities. Finland is a notable case, as its R&D tax credit policy only rewards collaborative research. Introduced in 2021, the scheme functions as an additional deduction from taxable income for eligible R&D co-operation expenditures. Initially, firms were able to claim a 50% additional deduction (equivalent to a 10% tax effect at the 20% corporate tax rate). From 2022 to 2027, the deduction was enhanced to 150% (a 30% tax effect), making the scheme more attractive. The maximum additional deduction available is EUR 500 000 annually. Eligible expenses are defined narrowly to focus on collaborative R&D, as they must be based on invoices from recognised research and knowledge organisations. While the scheme is relatively small, covering less than 2% of all business R&D spending in Finland, it reflects the government’s strategic priority to foster stronger collaboration between the private sector and higher education.

2. Position “Made Smarter” as the national programme for small manufacturing upgrading

Rationale

Made Smarter is the UK’s national programme to support digital upgrading in manufacturing SMEs, providing tailored advice, leadership training and matched funding (see chapter 3 for more details) (Department for Business and Trade & Department for Business, Energy & Industrial Strategy, 2017[5]). A subsequent expansion has brought the programme to a national level and, more recently, into professional business services (PBS). While this expansion recognises the blurred lines between manufacturing and B2B services, such as logistics, maintenance, or IT solutions, some stakeholders remain concerned that widening the remit of the programme risks diluting its focus on manufacturing and budget.

Made Smarter has been consistently praised for its hands-on, case-driven approach, combining tailored advice with leadership training, peer learning, and grants for adoption. UK stakeholders have confirmed its practical value, stressing that SMEs respond positively when support is integrated into real business cases rather than generic awareness campaigns. Independent evaluations likewise report increased SME confidence, faster adoption of digital tools, and early productivity gains, particularly when advisory support is bundled with matched funding (SQW, 2025[6]; North East LEP, 2022[7]).

Despite its positive track record, coverage remains uneven. The programme is now being scaled up in England with a budget of GBP 99 million to reach around 5 500 SMEs, but devolved nations are not yet included (UK Government, 2025[8]). Similarly, each region seems to adopt a slightly different approach in programme implementation, as shown in chapter 3. While this ensures flexibility, it also undermines the national branding of the programme, as in each region “Made Smarter” conveys a slightly different meaning for the businesses which are the potential clients of this programme.

There is also debate about the future scope of the programme. While some stakeholders have called for expanding Made Smarter into additional sectors such as creative industries, others have stressed the risk of further diluting the mandate and budget of the programme that this choice would imply.

Proposal

It is suggested that Made Smarter be expanded into a truly countrywide programme, extending coverage beyond England to the devolved nations to ensure equal access. The programme should come with strong national branding and flexible guidelines to ensure that it is well-known by small business owners across regions but also adapted to regional circumstances. The US Manufacturing Extension Partnership (MEP) programme and Canada’s Industry Research Assistance Programme (IRAP) provide possible examples to follow for the United Kingdom (see below).

From a sector perspective, the programme should maintain its core focus on manufacturing and professional business services (PBS), where spillovers between production and service provision are strongest, while avoiding over-expansion into unrelated sectors.

Delivery could be strengthened in four ways:

• National scope with regional tailoring: A central framework for governance and funding should be combined with devolved implementation through regional delivery partners, mirroring the US MEP model. This would ensure coherence while leaving room for local adaptation.

• Independent and diverse advisory base: As highlighted in evaluations of Made Smarter Adoption North-East, SMEs benefit the most from hands-on, impartial coaching tied to concrete projects (North East LEP, 2022[7]). Expanding the consultant pool, with strict independence standards and periodic quality reviews, will reduce the risks of technology lock-ins and strengthen business trust in the programme.

• Funding tied to adoption outcomes: Evaluations of the Made Smarter Innovation Challenge show that adoption accelerates when funding is bundled with advisory support (SQW, 2025[6]). The expanded programme should retain this principle, linking grants to clear milestones such as technology go-live or process improvements.

• Structured peer learning and leadership development: Building on the success of leadership training and peer cohorts in the pilots, Made Smarter could institutionalise structured peer networks, ensuring SME managers learn directly from each other through implementation cases

Two relevant examples for the United Kingdom would be the US MEP programme and Canada’s IRAP programme. The former is administered by the National Institute of Standards and Technology (NIST), an agency of the U.S. Department of Commerce. Although MEP is a federal programme, it works in a decentralised manner through public private partnerships in which state governments partner with local industry stakeholders in the design and implementation of programme activities. This multi-level structure allows the programme to be flexible enough to address the different development needs of manufacturing industries at state level, while maintaining a national framework for overarching funding and branding. The federal umbrella of the programme, as well as its longstanding existence, has also ensured that the programme is well-known nationwide and that baseline guidelines are the same in every state. Furthermore, federal sponsorship and co-ordination make it possible to share good practices and experiences across different states, thus favouring the diffusion of innovative practices across the different states of the nation.

Canada’s National Research Council’s (NRC) Industrial Research Assistance Program (IRAP) is targeted at innovative and growth-oriented SMEs. It has a presence in 120 locations across 10 provinces and provides technology support and funding for innovative projects in companies. IRAP engages with over 16 000 SMEs every year, providing direct technical/business advice and funding support through a network of 250 field staff known as Industrial Technology Advisors (ITAs). The ITAs are close to their client base and are often located in technology parks, innovation support organisations, incubators, universities, and colleges across the country. These individuals typically join IRAP after they have achieved extensive private sector experience as senior managers or/and entrepreneurs in SMEs. The sector experience of ITAs is typically matched with the needs of the regional clients. Although ITAs are located throughout Canada, all clients have access to the collective expertise of the ITA community. The location and number of ITAs is constantly re-evaluated to ensure the appropriate skill sets are available to meet the demands of the market. Typically, ITAs have a local office but they also travel extensively (for some, 80% of their time) to meet with the clients at their site and bring them the necessary support and resources.

3. Support an inclusive approach to digital adoption by strengthening the digital component of the business growth hubs

Rationale

The consultation process revealed a clear tension on the expected focus of technology adoption policies (see chapter 3 for more details). While some organisations, especially at national level, argued that public policies should prioritise the companies with the greatest likely impact on productivity growth, other stakeholders, especially at regional level, stressed the importance of an inclusive approach to technology adoption which does not leave behind the vast majority of SMEs, particularly in foundational sectors.

The United Kingdom has several national centres of excellence focusing on advanced digitalisation, such as the Digital Catapult Centre, the Hartree Centre, and the National Innovation Centre for Data. However, the support landscape for low-tech SMEs – firms for which basic digital tools such as e-commerce platforms, accounting software or digital marketing solutions represent transformative steps – is comparatively underdeveloped. Partial exceptions, as seen in the previous chapter, are the national network of “Business & IP Centres” (BIPC) of the British Library and the “Digital Pathfinder” scheme in the North-East, both of which have drawn on funding from the UKSPF.

At the same time, the Department for Business and Trade (DBT) operates a large network of about forty Business Growth Hubs (BGH) across England, which function as “one-stop shops” for SMEs seeking advice on business planning, finance, skills, or scaling. Despite their broad remit and accessibility, these hubs currently provide only limited services around technology adoption, representing a missed opportunity to mainstream digital support into a public system that SMEs already know. Independent evaluation shows that the BGHs engage around 8% of all businesses in England (well above the 2.5% target), and firms supported by hubs report stronger outcomes than non-beneficiaries: employment was 14% higher one year after first engagement, and 22% higher after five years. Yet the evaluation also highlights uneven provision, with thematic areas such as digitalisation representing only a small share of the BGH activities and with considerable variance across regions (Technopolis Group, 2022[9]). Recent analysis by the Tony Blair Institute similarly notes that this existing network could play a much stronger role in technology diffusion. In particular, it recommends establishing a network of university-based technology-adoption centres and embedding Growth Hubs within universities, so that hubs act as the interface between central government, universities and local business ecosystems, helping deliver more coherent support across regions as part of a strengthened national diffusion system (Tony Blair Institute, 2025[10]).

Altogether, this points to a policy gap: while frontier support exists for high-tech firms and sporadic pilots address basic needs in some regions, there is no consistent national framework to ensure that all SMEs – particularly those outside leading sectors and regions – can access tailored support for digital adoption.

Proposal

To address this gap, it is suggested that the existing network of Business Growth Hubs be leveraged to deliver a more systematic and inclusive digital adoption offer to SMEs across England. The BGHs could provide initial guidance on simple digital matters such as software selection, website improvements, and digital marketing, with established referral pathways toward more sophisticated support where needed. In doing so, low-tech SMEs would have a clear entry point into digitalisation pathways across the country, reducing the current inconsistency of this offer. To broaden the reach and ensure progression, this policy could adopt a tiered model, looking at SME technology adoption as a structured journey along different levels of technology maturity. Within such model, the BGHs would focus on entry-level support, offering first-line guidance (e.g. through clarifying technology needs and investing in technology readiness) and then referring firms with more advanced needs to specialised and accredited organisations, including through existing programmes like Made Smarter.

An example of such an approach comes from Singapore’s SMEs Go Digital (SMEGD) programme, which covers different company profiles through four different offers:

• Start Digital (SD) (2018): To provide new firms or firms that have yet to digitalise with foundational and easy-to-deploy digital solutions (e.g., digital marketing, digital transactions, accounting, human resource management, cybersecurity, etc.).

• Productivity Solutions Grant (PSG) (2018): To support the adoption of curated digital solutions that improve firms’ productivity (e.g. ERP, retail management systems, etc.)

• Grow Digital (2019): To support firms’ participation in business-to-business (B2B) and business to-consumer (B2C) e-commerce platforms to sell overseas.

• Advanced Digital Solutions (ADS) (2020): To support firms’ adoption of advanced digital solutions to deepen their capabilities, including in areas like sustainability.

Between 2017 and 2024, the SMEGD programme supported over 88 000 SMEs, which represent a substantial part of Singapore’s SME population of over 300 000 SMEs in 2024. An impact evaluation of Singapore’s SMEs Go Digital programme found that PSG and SD grants led to measurable improvements in firm performance between 2017 and 2020 (Ministry of Trade and Industry, 2023[11]). Firms receiving PSG support experienced an average increase in value-added per worker by 3% and revenue by 2.2%, while SD grant recipients saw increases of 1.8% in value-added per worker and 1.6% in revenue. Smaller firms benefited the most, with micro firms achieving up to a 6.4% increase in productivity under PSG and 4.4% under SD. Notably, sector-specific PSG solutions were almost twice as effective in improving firms’ productivity and revenue compared to generic solutions.

Another example of an inclusive and staged approach still comes from Southeast Asia, where the programme portfolio of Malaysia’s SME Corp (the national SME agency) reflects firm technology readiness based on a previous internal assessment. The SME Competitiveness Rating for Enhancement (SCORE) is a national diagnostic tool that assesses SMEs across seven performance dimensions, including technology adoption, human resources, and innovation, and assigns a star rating to indicate their maturity. This enables SME Corp and partners to direct firms to appropriate next-step support, whether grants, skills training, or advisory services across different areas, including technology adoption.

To conclude, a consistent digital offer delivered through the UK DGHs would ensure wide geographic coverage and continuity beyond time-limited pilots, reduce fragmentation in basic digital support, and help shift diffusion dynamics so that digital adoption spans a wider spectrum of the business population. In this respect, a catalogue of vetted solutions, developed with sector bodies and technology providers, could give SMEs greater confidence on the quality, interoperability and security of certain digital technologies.

4. Design a staged approach in implementation of the voucher scheme

Rationale

As noted in the previous chapter of this report, there was disappointment among stakeholders, backed by evaluation evidence, with the “Help to Grow: Digital” programme, which was a UK voucher programme offering small sums to SMEs to purchase digital solutions from technology providers. Although the “Help to Grow: Digital” (HtGD) programme contributed to positive outcomes for SMEs that engaged with the scheme, it suffered from low uptake which has been linked to strict eligibility requirements, limited flexibility in the use of vouchers, the narrow range of software on offer, and the need for greater communication about the scheme.

However, vouchers themselves are not inherently ineffective (RSM UK Consulting LLP, 2023[12]). Evidence from OECD countries shows that when designed as light-touch, staged and advisory-backed instruments, vouchers can be highly effective at lowering entry barriers for SMEs, reducing transaction costs, and building trust with external providers (Interreg Europe, 2021[13]; NESTA, 2011[14]; Innovation Growth Lab, 2020[15]), whether these be private-sector companies, research institutions or universities. Vouchers are particularly well suited for low-tech SMEs by funding those early steps that enable technology adoption, such as initial diagnostics, scoping, and training.

Typical success factors for vouchers include communication about their existence in the media and specialised press, a simple application process which should nonetheless at least outline the problem to be solved, clear selection criteria (a lottery for companies which meet eligibility requirements is also an option, as done in the Netherlands), a list of pre-approved technology providers, and simple reporting requirements.

In most cases vouchers have been given to single companies to deal with a specific single problem. However, there have also been models that have departed from this original approach, for example by allowing companies facing similar challenges to pool their innovation vouchers and receive higher-quality consulting services or by introducing a two-tier system where companies can receive a larger voucher after an initial small one if they meet certain development milestones (e.g., to move from a feasibility study to the implementation of a technology solution). Such two-stage designs could, where appropriate, complement the adoption journey outlined in the previous suggested policy (i.e. support an inclusive approach to digital adoption), with smaller exploratory vouchers that could be offered through the Business Growth Hubs at entry level and larger follow-on vouchers aligned with more intensive advisory and implementation programmes such as Made Smarter for firms that are interested in the adoption of more advanced technologies.

Proposal

Given the limited success of the “Help to Grow: Digital” programme, which acted too much in isolation from other technology adoption policies, the UK government could redesign vouchers as a multi-stage, advisory-backed tool to rebuild trust and enable SMEs to take their first digital steps.

Key design elements could include:

• A two-tier approach: where a first small voucher could be used to fund exploration, diagnostics or feasibility studies, while a second larger voucher could be aimed at firms that successfully complete Stage 1 to support implementation or scale-up.

• Delivery via intermediary organisations (IOs): vouchers could be channelled through trusted intermediaries such as the Business Growth Hubs, Business & IP Centres, or chambers of commerce. These organisations could provide light-touch advisory services, ensure that vouchers are used with accredited providers, and act as neutral brokers between SMEs and vendors.

• Catalogue of accredited providers: SMEs could be asked to redeem vouchers only with pre-approved providers that meet baseline criteria with respect to quality, transparency, and interoperability. This would reduce search costs, strengthen trust, and prevent vendor lock-in.

• Thematic vs generic targeting: vouchers could be generic in focus or support priority missions such as digital basics (ERP/CRM, accounting software, HRM, digital marketing), sustainability (energy efficiency, circular economy), or early AI/data use-cases. This would ensure that the policy is aligned with broader UK industrial and innovation strategies.

• Gateway function: vouchers should act as an entry point into the technology adoption pathway, rather than a stand-alone instrument. Successful voucher projects should be offered the option to connect with other relevant larger programmes, such as Made Smarter.

Through this approach vouchers could once again become a light-touch but strategic tool to enable SMEs’ first technology adoption, align such adoption with broader strategic objectives, and build trust between SMEs, technology vendors and government actors. There are many international examples from which the UK government could draw inspiration.

Sweden offers a good example of a tiered approach to vouchers, although the focus in this specific case is on start-ups and the green transition. Here, the national energy agency awards grants through regular calls, typically opened twice per year. Three different grants are currently on offer to meet the needs of start-ups at different stages of development:

• Concept development: a grant of up to SEK 300 000 to define and develop a technology concept.

• Verification of customers: a grant of up to SEK 3 million to develop a technology prototype, covering up to 45% of the eligible costs of a project.

• Pilot and demonstration: a grant of up to 45% of the eligible costs of a project that has capital costs of at least SEK 7 million. The technology must be at least at technology readiness level 5 and through the project aim to reach levels 6-8.

The Swedish Energy Agency has supported 250 companies and provided approximately GBP 78 million to a portfolio of companies with an aggregated valuation of approximately GBP 2.6 billion and an estimated impact of one billion tonnes of avoided carbon emissions.

Estonia’s innovation voucher scheme offers an example of voucher programme integrated into the wider national innovation strategy. Active since 2015 and extended through 2030, the programme provides SMEs with grants of up to EUR 6 000-7 500 to access external expertise for feasibility studies, IP assessments, and technology audits. The programme is integrated into Estonia’s Digital Agenda 2030 and Entrepreneurship Growth Strategy as an early stage to help firms to test ideas before progressing to larger-scale grants or collaboration projects.

Switzerland’s Innosuisse “Innovation Cheque” follows a similar model. The voucher (CHF 15 000, GBP 14 000) is specifically designed for early-stage problem scoping, such as feasibility studies, proof-of-concept work, or technology assessments, before committing to larger innovation investments. This instrument lowers entry barriers for SMEs with no prior collaboration experience and serves as a gateway into Switzerland’s broader innovation ecosystem, which includes co-funded R&D projects and scale-up support. Based on monitoring reporting, 77% of ideas continue after the cheque and 26% subsequently progress to a standard Innosuisse Innovation Project (Innosuisse, 2023[16]).

5. Develop an introductory AI policy (AI package) for SMEs

Rationale

UK evidence suggests that AI adoption, understandably, is still at an early stage at national level. ONS pulse data show roughly 25% of businesses reporting some AI use in late December 2025 (Office for National Statistics, 2026[17]). Similarly, only 7% of UK manufacturers report being “very knowledgeable” about AI applications (Department for Science, Innovation and Technology, 2025[18]). Existing evidence points to three recurring frictions for SMEs: (1) getting data and workflows ready and meeting basic governance expectations, (2) selecting trustworthy providers and applying proportionate assurance, and (3) integrating tools and managing change to reach a live deployment. As shown in the third chapter, these concerns are exacerbated by data confidentiality, possible re-use of business data by suppliers (i.e., data monetisation), and the need for clear exit/portability plans. Survey evidence supports these findings, showing that common concerns reported by SMEs include data accuracy (21%), data security (22%), and perceived lack of relevance (21%), patterns that echo across OECD countries (Be the Business, 2024[19]).

The United Kingdom already publishes entry-level AI assurance guidance and tools that SMEs can use without heavy certification, while the Information Commissioner’s Office’s (ICO) AI & data-protection guidance sets a clear floor on fairness, transparency and lawful processing. Together they provide appropriate guardrails for policymakers interested in setting AI programmes for businesses (Office for National Statistics, 2024[20]).

Complementary UK initiatives can underpin an SME-oriented AI package. The government’s AI Growth Zones, one of the pillars of the UK Modern Industrial Strategy, aim to unlock private investment in AI-enabled data centres by streamlining planning and improving access to power, with locations to be confirmed following the application process (Department for Science, Innovation and Technology, 2025[21]). In parallel, Innovate UK’s BridgeAI programme provides a delivery channel for adoption support in priority sectors such as agriculture and food processing, construction, creative and transport, logistics and warehousing – combining mentoring, skills and small-ticket finance (including Innovation Vouchers of up to GBP 15 000) – and has supported over 3 400 organisations to date (Innovate UK, 2025[22]).

International practice shows that targeted, coaching-plus-voucher schemes work better than generic grants as they tie funding to concrete uses and applications. Korea’s national data/AI voucher approach is an example (see below): by supporting data preparation and AI integration for SMEs at small ticket sizes, it has fostered AI adoption beyond the ICT sector and has rapidly expanded a domestic user base (Caloffi et al., 2022[23]) (World Bank Group Korea Office, 2024[24]).

Finally, pro-innovation framework conditions matter. In this respect, the UK’s AI-relevant sandbox family (FCA Regulatory/Digital Sandbox and the new Supercharged Sandbox collaboration) can clarify compliance paths for use-cases by SMEs in regulated environments.

Proposal

A potential policy for the UK government to consider would be an integrated initial AI package to enable a first, low-risk AI deployment within 8-12 weeks for SMEs with limited prior experience of AI. It would combine a short, hands-on coaching with a small implementation voucher, as well as adequate regulatory safeguards for confidentiality, portability (i.e., the ability for SME buyers to switch technology supplier without incurring a penalty), and responsible use. The voucher element could be offered as a stand-alone instrument or as a dedicated stream within the broader voucher scheme set out in the previous policy suggestion, in which case a share of the overall voucher budget would be earmarked for AI adoption.

The scope of the action would be deliberately focused: for example, each participating firm would select a single priority workflow, implement it safely to production, and receive a structured handover from the technology provider. While use cases could target either process efficiency or new/enhanced products and services, it would be recommended that the policy prioritise process-efficiency gains in the initial phase, as these have typically shorter implementation timelines than the launch of new products or services. Delivery could be organised in sector/size-based cohorts to encourage peer learning and enable like-for-like benchmarking.

Participation in the programme could start with a brief readiness session led by an accredited coach. The firm and coach would identify together one high-value process, specify data requirements, and agree a short implementation plan that defines roles, risks and criteria for “live” operation.

A voucher would then fund the practical work required to reach live operation: scoping, data preparation, configuration of the AI tools, integration within the firm’s internal systems, user training, and a handover package. Public funding could be released against a couple of development milestones, such as approval of the implementation plan and verification of a proof-of-value in production, to ensure that the voucher scheme remains light-touch from an administrative point of view. Milestones could be specified as: (i) scoping and readiness (problem statement, data/workflow audit and portability plan), (ii) minimum viable product in production (working prototype in the real environment), and (iii) handover (standard operating procedures and short staff training). Funding intensity could be tiered by firm size and the project’s ambition (e.g., off-the-shelf adoption versus more complex integrations).

The programme could be implemented in partnership with accredited technology providers, which would have to comply with specific programme rules on issues such as data confidentiality, data monetisation and “portability” of the solution.

Participating firms would retain ownership of their data and of any project outputs, unless expressly licensed otherwise. Similarly, technology providers should not be able to re-use or monetise SME-specific data or AI-produced outputs for follow-on training or commercial purposes without a separate, time-limited, opt-in licence that specifies scope, permitted uses, anonymisation standards, revenue-sharing (where applicable), audit rights and termination. Should the supported AI project create a re-usable dataset, the programme should offer standard licensing options (e.g., private, shared within a named consortium, or open under a recognised licence). Programme templates and checklists could align with emerging international standards, notably ISO/IEC 42001 (AI management systems) and ISO/IEC 23894 (AI risk management), with simplified self-assessments for SMEs and full compliance expected by accredited providers.

The administration of the programme should be simple, in line with the fact that the programme would be an AI entry-point for SMEs. For example, applications should be simple and evidence requirements minimal, but verifiable. A national department would set eligibility requirements for SME participants as much as for the technology providers, maintain model terms (which could be made available online), and process voucher payments. Regional partners (e.g. the network of Business Growth Hubs and Business & IP Centres) could partner with local technology providers to deliver the coaching.

To test the ground, the programme could start with an initial pilot phase in selected sectors with higher expected benefits from AI use. After an initial evaluation assessing costs, uptake, time-to-live, user satisfaction and basic efficiency improvements in the targeted workflow (for example time saved for staff, cost savings, error reduction or increased output), the pilot programme could be scaled up to the whole economy. In doing so, the final version of the programme would also benefit from the technology and regulatory progress of AI in the coming years, as the quality of technology providers improves, the AI market deepens, and regulatory safeguards are refined.

While AI policy is a very new area, some countries have started deploying specific policies covering AI adoption through a combined “advisory and funding” approach. Korea, for example, has put in place an AI Voucher Programme (AIVP) that supports the widespread adoption of AI solutions by SMEs, with the dual objective of lowering adoption barriers and creating new market opportunities for AI developers. The delivery structure of this programme is centred on a digital platform that hosts pre-developed AI solutions and aims to match demand and supply. At its inception, the AIVP did not distinguish between different programme tracks. However, reflecting the fast-changing AI technology and market landscape, the programme has eventually restructured into four operational tracks: General, AI Semiconductor, Micro-business, and Global, each with distinct objectives and delivery methods.

While the AIVP follows a common structure in which firms adopt AI solutions from registered suppliers, its four tracks are clearly differentiated in objectives and operational modalities. The General track is the most inclusive, covering SMEs and mid-sized firms across different industries. Its primary aim is to stimulate broad-based AI adoption, with government funding concentrated on the application of registered solutions, and evaluation criteria focusing on firms’ readiness and commitment to digital upgrading. The AI Semiconductor track is distinct in requiring consortia to include not only firms and technology vendors but also domestic AI semiconductor producers and cloud service operators. With higher project ceilings (up to KRW 230 million, including earmarked support for semiconductor infrastructure), this track is designed less for diffusion than for validating AI services based on locally developed semiconductor technologies. The Micro-business track targets very small firms and sole proprietors. Here, supply firms apply on behalf of groups of at least ten micro-businesses, delivering turnkey solutions. Micro-businesses are exempted from matching contributions, while supply firms bear the private share of the programme’s costs. Finally, the Global track is oriented towards internationalisation. In this track, technology vendors apply independently, with overseas partners serving as demand clients. Projects must demonstrate verified contracts and are required to deliver internationally recognised outputs such as proof-of-concept pilots and certifications.

Additional AI-specific examples with similar “advisory + funding” mechanics include:

• France’s IA Booster, operated by Bpifrance and delivered with regional partners, guides firms with between 10 and 2 000 employees through a four-stage process: awareness/training, data diagnostic, solution selection and pilot implementation, with subsidies covering up to 80% of consulting costs, depending on firm size and project maturity.

• Brazil’s new Industrial AI Programme, run by SENAI (National Service for Industrial Training), guides firms through an ‘assess-train-apply’ pathway with an in-person immersion for leaders, a free six-dimension readiness assessment and action plan, tailored workforce courses, specialist consultancy, plus an AI residency that develops firm-specific proof of concepts. Firms and workers also have access to SENAI’s AI Hub of experts and case studies.

• AI Denmark is a national, research-based programme that has taken 120 SMEs through a six-month adoption journey (the funded project ran between 2021 and 2024), pairing a firm-specific AI pilot with hands-on workshops and change-management support, while building a national AI community with case libraries, an online platform and awards.

Other international policies, while not AI-specific, have integrated an AI component into broader digitalisation policies and/or follow some of the elements suggested in this policy proposal for the United Kingdom, such as tailored advisory services combined with funding and pre-approved digital solutions.

In Singapore, for example, the Chief Technology Officer-as-a-Service (CTOaaS) is a one-stop digital advisory and implementation support channel. The programme starts with a simple online digital readiness self-assessment. By answering a short series of questions, SMEs receive a bespoke diagnosis of their digital maturity, recommended digital solutions tailored to their business profile, and information on relevant government funding schemes. Beyond this, SMEs can access free digital consultancy and project management support from a shared pool of government-approved digital consultant, who provide one-to-one guidance, helping SMEs plan and implement their digital transformation projects. The initial engagement is fully subsidised, lowering the entry barrier for SMEs. Singapore also runs a repository of pre-approved digital solutions. There are over 450 subsidised digital solutions available for selection, ranging from those that address sector-specific or common business needs, to those that serve to streamline operations, enhance business sales revenue or safeguard business resiliency.

Other relevant programme examples come from Canada, Germany and Austria. Canada Digital Adoption Programme (CDAP)6 combined direct grants for SMEs with access to accredited digital advisors, who help firms design and implement tailored technology strategies. As of the programme’s official closure in March 2025, CDAP had helped over 63 000 SMEs to adopt digital technologies to enhance productivity and competitiveness. Germany’s Go-digital programme (BMWK) has until recently supported SMEs via authorised consulting companies that delivered diagnostics and implementation across modules such as IT security, digital market development, and digitised business processes. Finally, Austria’s KMU.DIGITAL programme provides co-funding for digital diagnostics and implementation projects, always contingent on working with certified consultants.

6. Strengthen the commercialisation dimension of the Catapults

Rationale

Innovate UK’s Catapult Network brings together nine7 sector-based centres with more than 65 locations and over 6 000 staff to help firms test, demonstrate and scale new technologies. Independent evidence highlights substantial impact underscoring the role of the Catapults as national assets for applied R&D and commercialisation. A quasi-experimental study by the Enterprise Research Centre, for example, found that firms engaging with Catapults grow employment around 16% faster over six years, with stronger effects for micro/small and high-tech firms. These companies also show higher turnover growth (Vanino and Roper, 2023[25]). An independent evaluation by Frontier Economics of the Offshore Renewable Energy (ORE) Catapult (2013-23) estimated at least GBP 93 million in additional GVA generated by the ORE Catapult, together with 111% higher turnover and 36% higher labour productivity among supported firms (Frontier Economics, 2025[26]; Catapult Offshore Renewable Energy, 2025[27]). Taken together, this track record indicates that the Catapults are well placed to address existing commercialisation bottlenecks and to use commercialisation as a diffusion lever by helping firms turn new technologies into standard products and services, build distribution and support channels, and reduce perceived risks for adopters, thereby enabling uptake by a wider set of businesses.

Yet meetings with stakeholders have pointed out that the United Kingdom performs strongly up to the prototype stages (TRLs 6-7), while it faces a persistent gap at TRLs 8-9, which correspond to demonstration at scale, validation with customers, and early-market entry. Addressing this “last mile” gap was frequently mentioned as an area where the Catapults could play a stronger role, provided that their commercialisation mandate is made explicit and adequately resourced. This could take the form of lifecycle engagement models with support that is more spaced but sustained over long periods of time, for example through alumni services, follow-on technical and go-to-market assistance, and re-integration mechanisms for companies that have already received support.

Proposal

This proposal is based on discussions with a limited number of Catapults and regional stakeholders (see Annex A for the full list of stakeholders), whereas each Catapult has a distinct mandate, business model and regional context.

Against this backdrop, it is suggested that the Catapults add a dedicated commercialisation offer that explicitly targets TRLs 8-9, complementing and not replacing their ongoing work on TRLs 3-7 (i.e., applied R&D and prototype activities). The new offer would support commercialisation activities such as demonstration at scale, customer validation and early-market entry and would provide support over a longer, more spaced timeframe than typical prototype programmes, with periodic touchpoints and follow-on services, including alumni support and re-integration of previous company recipients into relevant programmes. Where appropriate, demonstration at scale could be linked to innovation-oriented public procurement to accelerate market entry.

To mobilise the capital required at TRLs 8-9 without diluting their existing mission, the Catapults could also work closely with the British Business Bank (BBB) to find public co-investment solutions and connections with private investors. The involvement of the BBB would complement the Catapults’ technical due diligence with adequate financial due diligence, helping crowd in early-stage equity finance.

Practically, the BBB could channel propositions from the Catapults to different possible in-house funding streams, although the final funding decision would remain with the private lenders or investors. Some relevant funding streams would include:

• The ENABLE Guarantee, which is meant to increase small business lending by UK-based financial institutions, notably for SMEs that find it difficult to access debt finance without the offer of a guarantee, including early-stage SMEs and smaller growth companies. In this case, companies proposed from the Catapults would be redirected to the partner private financial institutions, which are those responsible for submitting a loan portfolio on which the ENABLE public guarantee is applied.

• The Nations and Regions Investment Funds (NRIF), which are a set of region-focused investment funds offering both equity and debt finance in collaboration with local investors and delivery partners. As with the ENABLE programme, formal agreements could be established between the network of Catapults and the BBB by which applications sponsored by the Centres would be fast-tracked although, as noted earlier, the final funding decision would continue to stay with the local investors or delivery partners.

International experiences offer some insights in this direction. Germany’s Fraunhofer Institutes are a leading applied research organisation consisting of a network of 75 institutes. Like the Catapults, the Fraunhofer Institutes operate as a decentralised organisation with each institute that specialises in a specific sector or technology and that is embedded in local networks of universities, companies, research organisations, and trade associations.

The main activity of the Fraunhofer Institutes consists in contract research with SMEs, corresponding to 65% of their clients. However, the Institutes also offer additional services related to intellectual property rights, norms and standards, and market access (e.g., market analysis, training and certification services), which is also the suggested evolution for the Catapults in the United Kingdom. Interestingly, the Fraunhofer Institutes also engage in spin-off activity as a channel to exploit their own intellectual property. In 2023 alone, the organisation established 23 new spin-offs and held equity investments in a total of 83 high-tech companies.

Australia’s Commonwealth Scientific and Industrial Research Organisation (CSIRO) offers another example of a research and technology organisation (RTO) working more closely on research commercialisation. CSIRO couples a structured commercialisation pipeline – spanning research programmes, multiple IP-to-market pathways (e.g. licensing, research-for-equity, spin-outs, and collaborative ventures) and SME supports – with an investment arm to crowd-in private capital for ventures emerging from public research.

Finally, Canada offers an example of formal collaboration between an RTO programme and the national development bank. The National Research Council’s Industrial Research Assistance Programme (NRC-IRAP) and the Business Development Bank of Canada (BDC) have signed a formal Memorandum of Understanding (MoU) to align services and cross-refer clients, so that innovative SMEs can more easily access BDC financing, combining IRAP’s technical and business advisory support with BDC’s funding to speed up commercialisation. The MoU explicitly aims to accelerate R&D projects via advice, financing, and industry connections, illustrating a clear “RTO plus development bank” gateway similar to what is proposed for the United Kingdom. In 2021-22, IRAP made 34 referrals to BDC that led to 15 contracts, totalling CAD 9.16 million (BDC, 2020[28]; National Research Council Canada, 2022[29]).

Skills development

7. Support digital skills development both in the student and adult-age population

Rationale

Technology adoption hinges on both managerial and workforce capability. Senior leaders make the investment decisions, but most adoption happens on the shop floor, so mid-level managers and workers need the skills and confidence to redesign processes and use new tools. UK stakeholders consistently stressed the importance of skills and advice, pointing to the relevance of “Help to Grow: Management” for leadership capability and “Made Smarter” for hands-on advisory services.

At the same time, they noted that workforce training is fragmented and still too reliant on one-off courses. Bootcamps, college offers, and short courses vary in recognition and rarely lead to official qualifications, making progression between different trainings difficult. In this regard, stakeholders called for short, industry-led, accredited modules that can eventually lead to meaningful credentials.

Building a future pipeline of digitally competent managers and workers also requires strong digital foundations. According to Lloyds Bank (2025), 18% of working-age adults lack essential digital skills for work, 15% lack foundation skills and 2% are digitally disengaged (Lloyds Bank, 2025[30]). The UK government has begun to address this through the TechFirst Initiative (June 2025), which targets one million secondary students through AI and digital learning into classrooms and communities, and via industry partnerships, which are meant to equip millions of workers with essential AI skills by 2030. A coherent national approach could extend and complement TechFirst by connecting early exposure to digital skills to a lifelong, stackable recognition framework of digital qualifications.

Proposal

The objective of this policy proposal would be to create a coherent, lifelong route for digital skills from school into the workplace by aligning existing activity and funding so that learners progress in small, recognised steps and so that firms can see skills translate into use on the job.

TechFirst could be extended into primary education, involving data literacy and practical device use. Teachers’ skills should be supported through practice-based training and ongoing pedagogical support, recognising that many of them may currently lack confidence in digital skills. This approach mirrors that of Estonia, where digital competences are embedded throughout the national curriculum from the earliest years, treating programming, data and media literacy as basic skills, and are underpinned by long-term teacher-development initiatives (Education Estonia, 2025[31]).

In secondary education, emphasis would remain on applied digital and AI skills and involve close links with the employers. Existing UK practices could be leveraged, such as university-industry hubs (e.g. University of Warwick), employer-engagement models (e.g., Scotland), or Studio School-style projects8 to strengthen the bridge between education and labour market by combining curriculum content with real workplace challenges.

For adults, continuous learning would be strengthened through short, work-linked modules delivered by further-education colleges, universities and other accredited providers. Training modules would be recognised and stackable, aligned with national competence standards and qualifications so that people can earn and build credits over time (see more details about this in Proposal 8). Here, Austria’s National Digital Skills Strategy offers a practical demonstration: six competence areas9 and eight proficiency levels10, which are mapped against the national and European qualifications frameworks, enable training providers to label short courses clearly, employers to recognise what a given competency level means on the workplace, and learners to progress in cumulative steps (Digital Skills Austria, 2024[32]). To ensure that this policy addresses not only young people but also current workers, modules would be co-designed with employers. In Talento Digital para Chile, for example, employer-driven curricula are refreshed annually through sector working groups, keeping training aligned with current professional occupations and evolving skills needs.

8. Build on the Growth and Skills Levy and develop micro-credentials to address more rapidly new skills demands in the labour market

Rationale

As highlighted in chapter 3, stakeholders often described the apprenticeship levy as too rigid for rapid, job-relevant upskilling, including because it limits the use of modular and on-demand learning. Smaller firms, in particular, reported time constraints and administrative burdens, as well as the opportunity cost of releasing staff, which have altogether made it difficult to align levy-funded training with day-to-day operational needs. Several stakeholders suggested that the levy should also be allowed to pay for shorter programmes that are better matched to business needs and advocated for recognised, stackable credits leading to job-relevant qualifications.

National analysis of the apprenticeship levy data supports these concerns. In 2022/23, SMEs (0-249 employees) accounted for 37% of apprenticeship courses, down from 40% in 2021/22 (Department for Education, 2025[33]). Spending is concentrated among levy-paying (large) employers, at around 69% of total apprenticeship spending in 2022/23. Qualitative evidence suggests that wage costs, supervision time, and the cost of covering the employee’s duties while they train remain significant barriers for small employers, which the current model does not adequately address (Wolf, 2025[34]; Dromey and Otto, 2025[35]).

Since August 2025, the UK government has begun to transform the apprenticeship levy into a broader Growth and Skills Levy, introducing new tools such as foundation apprenticeships and, from April 2026, short apprenticeship units in critical skills areas such as artificial intelligence, digital skills, and engineering. These reforms represent an important step towards greater flexibility and responsiveness. However, they do not determine whether short learning courses will be credit-bearing and portable across providers, how far SMEs will be able to access and use these offers at scale, or how strongly sector bodies will be involved in steering provision towards priority technology adoption needs.

Both international and UK-based evidence shows that the way the training levy is designed has a big impact on whether small firms really benefit from it. Different studies warn that rigid or poorly targeted levy schemes risk under-use by SMEs, whereas flexible and modular approaches, together with strong industry governance, improve relevance and take-up by SMEs (Mansfield and Hirst, 2023[36]; OECD, 2018[37]; Cedefop, 2020[38]). Empirical analysis of the UK’s apprenticeship levy confirms uneven effects by firm size: the ratio of participation in the programme per 1 000 employees is consistently lower in SMEs than in larger firms, reflecting structural barriers (Battiston et al., 2020[39]). Taken together, stakeholder testimony, utilisation patterns and the direction of current reforms suggest that the training levy could be further reformed, for example by allowing SMEs to fund short, stackable learning directly tied to technology adoption in the workplace, including through the acquisition of so-called micro-credentials.

In particular, enabling levy-funded, ISO-aligned micro-credentials could support compliance with recognised international standards, which is often a precondition for entering supply chains and regulated markets, while simultaneously building the digital, data and management capabilities required for technology adoption in smaller firms.

Proposal

Building on the recent evolution of the apprenticeship levy into the Growth and Skills Levy, including the introduction of more flexible tools like foundation apprenticeships and short apprenticeship units, the apprenticeship levy could be further reformed as a more flexible instrument supporting technology adoption, so that available funding can be used for short, recognised learning that is directly linked to technology use in the workplace.

The announcement of apprenticeship units starting in April 2026 already moves in this direction by allowing levy funds to support short, flexible courses in critical skills areas such as artificial intelligence, digital skills, and engineering. What is proposed here is to ensure that such units can operate as assessed, credit-bearing micro-credentials (for example 10-60 hours), aligned with UK qualification standards and portable across training providers, in line with the European Council Recommendation on a European Approach to Micro-credentials (European Union, 2022[40]).

Modules would focus on priority areas such as digital skills, data analysis, artificial intelligence, cybersecurity, and adoption-oriented management (e.g. vendor selection). Where relevant, modules could be linked to recognised standards and assurance schemes – such as ISO 27001 for information security management, ISO 50001 for energy management, ISO 9001 for quality management, or Cyber Essentials for baseline cyber controls in the UK – so that skills acquisition translates into formal certificates and market access.

Ireland’s MicroCreds offers a clear template. Here, a national framework of university-accredited, modular, part-time and stackable short courses are fully integrated into Ireland’s National Framework of Qualifications, thus ensuring recognition and portability of skills while allowing employees to upgrade their skills without leaving their jobs. Similarly, Western Australia’s Local Capability Programme provides grants of up to AUD 20 000 (50% co-funding) for SMEs to engage external experts to implement and obtain third-party certification of internationally recognised standards (e.g. ISO 9001 for quality management, ISO 14001 for environmental management, ISO 45001 for occupational health and safety).

The United Kingdom already offers substantial support to SMEs within the apprenticeship system, including fully funded apprenticeship training for eligible under-25s in non-levy-paying employers (i.e., SMEs), incentive payments for younger and disadvantaged apprentices, reduced co-investment requirements for non-levy payers, and targeted advisory support through the Apprenticeship Ambassador Network.

To further improve take-up among smaller firms, access could be simplified through simpler and faster application processes and by allowing pooled cohorts of apprentices from multiple SMEs organised through local intermediaries (e.g., Growth Hubs, Chambers, Business & IP Centres, university-industry centres). Denmark’s Industry Competence Fund (IKUF) and National Employers’ Reimbursement Fund (AUB) illustrate how levy-type mechanisms can lower costs for SMEs: IKUF provides subsidies for short, employee-selected courses that address immediate needs, while AUB reimburses the wages of apprentices during training and finances short upskilling courses, making “learning while working” more feasible for smaller firms.

Building on the development of apprenticeship units from 2026, sector bodies could also be supported to pool levy payments into sector-level funds to commission priority training modules that match industry needs (for example, cloud skills for small retailers, data handling for care, basic automation for construction, responsible AI in services). These modules would be co-designed with employers, delivered by accredited providers, and refreshed regularly as technologies and standards evolve. The Dutch sector training funds (O&O) offer a similar model, using training-levy resources to commission modular courses that are aligned to industry needs and whose participation is subsidised for SMEs.

In combination, these changes would allow funding short, recognised learning that is easy for SMEs to access and that is clearly tied to technology adoption in the workplace, while retaining quality assurance and portability across the training system and remaining coherent with the ongoing evolution of the apprenticeship levy into the Growth and Skills Levy.

9. Support peer learning through a theme-focused network approach (e.g., energy efficiency networks, digital skills networks, etc.)

Rationale

Stakeholders, especially at regional level, strongly supported peer learning as a practical way to accelerate SME technology adoption, through network events, case-sharing platforms and practitioner forums, with many of them proposing formal mechanisms to capture and circulate lessons from firm-level projects. Peer learning networks enable the diffusion of tacit, practice-based know-how that is difficult to systematise in formal training programmes. From a skills perspective, they complement formal education and training, which primarily provide theoretical and curriculum-based knowledge and typically struggle to keep pace with the speed of technological change. The development of a structured knowledge repository that document common barriers, effective delivery models and sector-specific challenges would make these experiences searchable and re-usable, helping SMEs to follow concrete digital adoption pathways.

Peer learning can have a strong multiplier effect: firms are more likely to act when they see close counterparts succeeding, and when anchor customers (large buyers) signal requirements, co-fund pilots and onboard suppliers against clear key performance indicators (KPIs). Competitive pressure among peers then sustains the change. Evaluations of peer learning networks show that when firms see close peers adopt a measure and report verified savings, they are more willing to invest. Seeing a comparable success case reduces uncertainty and strengthens the credibility of the managers advocating the investment (Rohde et al., 2015[41]; Durand et al., 2018[42]).

Yet peer effects are unevenly distributed. Smaller firms – those who could benefit the most – often lack exposure to visible “technology leaders”. Evidence from Germany’s Learning Energy Efficiency Networks (LEEN) found that less advanced firms hesitated to join networks at the outset, often waiting until peers demonstrated tangible outcomes, reflecting issues of awareness, time constraints, and trust (Rohde et al., 2015[41]). Evaluations of “Skillnet Ireland” show real additionality: many firms report they would not have arranged, or would have postponed, training in the absence of the programme (Indecon International Economic Consultants, 2022[43]). At the same time, broader Irish evidence notes that SMEs often face time and co-ordination constraints that limit engagement with training and technology initiatives, suggesting peer networks must be deliberately structured to include them (OECD, 2023[44]). This resonates with the UK consultation process: while larger or well-networked firms benefit from demonstration effects, smaller businesses are less likely to encounter relevant peers and often distrust vendor-led testimonials.

The United Kingdom already has building blocks that can be leveraged: Innovate UK’s Business Connect and its thematic Innovation Networks convene firms around specific challenges (e.g., AI, net zero), curate case studies and host practitioner events, while regional tech initiatives such as the UK Tech Cluster Groups bring together local digital ecosystems. These platforms are designed to connect innovation-active firms and signpost them to funding and expertise, often through expert-led knowledge transfer, broad networks and discrete events11. The proposal below is to add a complementary network of small, time-bound peer-learning cohorts for SMEs, underpinned by common diagnostics, shared adoption targets and a simple national repository, so that local experience can be aggregated and re-used.

Proposal

The United Kingdom could develop a structured programme of peer-learning networks to accelerate SME technology adoption, organised under a simple governance model. Each network would bring together 8-15 SMEs for 2-3 years around a clear theme (e.g., digital skills, AI adoption, energy efficiency) and be hosted at local level by accredited intermediaries. At scale, a national programme with multiple cohorts operating across regions and successive waves could therefore reach many SMEs, while preserving the small-group dynamics needed for effective, trust-based peer learning. A light-touch national co-ordination function designated by government would set common design principles, approve network themes, provide share tools and aggregate monitoring data and lessons, so that bottom-up experience can be synthesised at country level rather than remaining fragmented. Large firms could participate primarily as exemplars/testimonials and occasional hosts (e.g., site visits, supplier-readiness briefings), without being part of the core membership. In this way, the networks would draw on existing national and local platforms (including Innovate UK’s Business Connect and UK Tech Cluster Groups) for outreach and expert input, while focusing their own activity on cohort-based implementation support.

Networks could be hosted by trusted intermediaries such as the Growth Hubs, the Catapults, or local chambers, with sector/industry associations invited to co-host where relevant to ensure credibility and reach. Each group would be supported by a trained facilitator, with simple guardrails (no sales pitches; shared code of practice) to keep exchanges practical and peer-led.

Participation would begin with a light diagnostic/audit for each firm to set a baseline and shape a shared agenda. Members would co-design practical measures and set individual and collective adoption targets. Typical activities would include site visits, joint workshops, shared consultancy support, and simple progress benchmarking across the group. When a large anchor buyer is involved, its role could focus on time-limited, supplier-onboarding clinics. Costs would be shared, based on public co-funding (facilitation, diagnostics, shared tools) and firm contributions (staff time and a small co-payment).

International experience indicates this model reduces uncertainty and speeds technology uptake. Germany’s Energy Efficiency and Climate Protection Networks convene SME groups for 2-3 years with moderated support and shared targets. Evaluations show that participating firms not only implement significant and verifiable energy-saving measures, but also benefit from reduced transaction costs, stronger internal recognition of energy managers, and a culture of trust and continuous improvement. High participant satisfaction further underlines the model’s effectiveness, although recruitment of new firms remains a key challenge (Durand et al., 2018[42]).

Ireland’s Skillnet Business Networks offer another example of a peer-learning approach structured around skills development. This programme organises employer-driven sectoral/regional groups that co-identify skills needs and purchase training collectively, with public co-funding leveraging private investment. Evaluation evidence from 2019-2020 reports perceived impacts on productivity, quality and innovation, (Indecon International Economic Consultants, 2022[43]).

10. Develop new management-skills pathway within the HtGM programme to support hands-on technology adoption projects

Rationale

Strong management skills are a precondition for SME technology adoption and business growth. Evidence from the ONS Management and Expectations Survey (MES) shows that management practice scores are closely related to firm outcomes, and that firms with stronger management are far more likely to adopt advanced digital tools. In 2023, 37% of firms in the top decile of management practices had tested or adopted AI, versus 3% in the bottom decile, with this difference also reflecting into business performance (Office for National Statistics, 2024[45]).

Yet many SMEs still lack leadership capability to translate plans into consistent action. The UK Technology Adoption Review identified gaps in management skills as a significant barrier to adoption, alongside technological skills gaps: for example, around 40% of firms cite a lack of management skills as a barrier to AI adoption, with firms also reporting re-organisation costs and resistance to change among workers and managers as additional constraining factors (Department for Science, Innovation and Technology, 2025[18]).

Stakeholders during the consultation process expressed consistent positive views about the “Help to Grow: Management” (HtGM) programme, which is a 12-week management course delivered by business schools and combined with mentoring and peer learning. Independent evaluations also find that participants are very satisfied with the programme, with 91% of them likely to recommend it. Notably, after participation, participants expressed higher confidence to achieve goals, developed stronger leadership and management skills, expanded peer networks, and self-reported improvements in operational effectiveness, efficiency and digital adoption. While these are interim, self-reported impacts, they are sufficiently robust to justify scaling the programme and tailoring it for growth-oriented firms (Department for Business and Trade, 2024[46]).

In doing so, the United Kingdom could also draw inspiration from the experience of its past Manufacturing Advisory Service (MAS) programme, which provided practical management and operations support and also showed positive outcomes for participant firms (i.e., increased productivity) (Department for Business, Innovation & Skills, 2016[47]).

Proposal

The suggested policy would be to introduce a dedicated management-skills pathway within the “Help to Grow: Management” programme for growth-oriented SMEs with concrete technology-adoption plans. The objective would be to build on a programme that is already performing well, while adding a more execution-oriented management course for firms that need practical support to translate management learning into technological change. The new pathway would retain the core HtGM model (short course, peer learning, one-to-one mentoring and an alumni community) but would have a strong focus on management support towards the implementation of technology projects, including, for example, vendor selection and contracting, process redesign, basic data governance and privacy, and leadership/soft skills (creativity, integration capability).

Additional changes could involve different tracks in the delivery methods: (i) a dedicated middle-manager track to translate strategy into day-to-day change; (ii) light gamification to sustain engagement; and (iii) a modular, choose-your-path design so firms choose what they need most.

• Part A: Extended Growth & Digital Pathway (16 weeks): a blended programme that combines action-led delivery with core management principles (operations, finance, people). The structure could comprise 12 weeks of class learning (diagnostics; process mapping; data foundations and governance; vendor selection and contracting; measurement and KPIs), followed by 4 weeks of supported implementation. The final outputs could be a concise Growth & Digital Action Plan and at least one digital workflow running in production (e.g. a simple automation process or a pilot dashboard). The middle-manager track would emphasise workflow redesign, team communication and coaching for adoption.

• Part B: Essentials Fast Track (4-6 weeks): This would be a shorter route focused on moving from intent to a first technology deployment. It could involve rapid diagnostics; process redesign; vendor shortlisting and contracting; basic privacy/data governance; and change leadership. The format would comprise 10-12 concise sessions with a light time burden compatible with executive schedules. The main output could be a viable first use case and a 90-day follow-through plan.

• Part C: Daily micro-learning: a “Duolingo-style” layer of short daily tasks to reinforce behaviours during Part A or B and for 12 weeks after, without adding contact hours.

International practice could inform the approach. Germany’s Initiative New Quality of Work (INQA) Coaching is a publicly co-financed model in which trained coaches work inside firms on digital and organisational change. Its relevance here is the emphasis on workflow redesign, employee participation and practical implementation rather than classroom inputs. Spain’s Generación Digital PYMES is a national programme for SME leaders delivered by accredited providers through a standardised, cohort-based format that combines training and mentoring for digital transformation. Its value for the United Kingdom lies in the structured mentoring that keeps the focus on adoption and measurable process improvements.

Delivery would remain national in scope and locally connected, through accredited business schools and providers for the core teaching and mentoring, and through local partners for follow-through and peer exchange, so that graduates can draw on alumni networks and nearby support as they implement their Growth & Digital Action Plans. KPIs would track completion, early implementation steps and visible adoption markers, such as a first digital workflow live or a technology adoption initiative underway.

11. Use business succession and catalogues of accredited tech solutions as further levers to enhance SME tech adoption

Rationale

For many UK SMEs, the constraints on adoption are as much cultural and relational as they are technical or financial. Even with subsidies, many firms hesitate because they do not trust vendors, fear lock-in and disruption, and lack managerial know-how to lead change. In manufacturing, in particular, many firms are led by relatively older owners and rely on legacy IT. However, the reluctance to adopt new technologies can be rational when no succession is envisaged. Cost, difficulty identifying appropriate solutions, low trust in vendors, and delivery biases (e.g., seasoned consultants favouring familiar technologies) compound a fear of making the wrong investment. Smaller firms – less able to absorb mistakes – are especially exposed, which fosters a wait-and-see attitude until peers demonstrate success, which explains the emphasis that stakeholders place on peer learning.

Timing also matters. Ownership and leadership transitions, common in ageing sectors, are natural inflection points to reset processes, systems and culture. In the UK, 69% of family business owners report having no formal succession plan, underscoring the case for coupling succession finance and advisory with digital diagnostics, migration plans and implementation support so that the handover becomes a modernisation event (STEP, 2024[48]).

Proposal

The UK could introduce a Trusted Adoption pathway to lower perceived risks and use business succession as a natural trigger for modernisation. Delivery would rest on two complementary levers: (1) a trusted, supplier-neutral market route that reduces information asymmetries; and (2) succession-linked support that uses ownership change as a mandate for modernisation. Delivery could build on existing UK assets (e.g., Catapults, Business & IP Centres, chambers, university hubs) so that advice is independent, and access is local.

• Pillar 1 – Catalogue of accredited solutions: Establish a vendor-neutral route to technology adoption built on accredited catalogues, neutral diagnostics, and vouchers tied to real implementation. Public catalogues would list solutions and implementers that meet baseline criteria (transparency, interoperability, security, user support, fair terms). SMEs would receive a light diagnostic with side-by-side comparisons and access to independent advisers, while funding could be released in stages (contract, go-live, verified use). An example is Singapore’s approach, where the Productivity Solutions Grant (PSG) offers a catalogue of pre-approved solutions with transparent features and pricing, and where the CTO-as-a-Service programme provides diagnostics, comparisons and neutral guidance. The lesson for the UK is that accreditation with buyer choice and independent advice can reduce risk while preserving competition.

• Pillar 2 – Succession as an opportunity: Firms approaching a handover could be offered a package combining diagnostics, migration plans, and onboarding for incoming leadership, so that succession becomes a modernisation event rather than a point of risk. Japan’s Small and Medium Enterprise Agency (SMEA) supports both business succession and SME digitalisation/IT introduction. At the moment of business succession, support instruments include tax incentives, finance support, and advisory services through the SME Assistance Centres. Particular attention is given to ensuring support for the business succession from middle managers to eschew a failed handover.

  • Tax relief: a dedicated Business Succession Tax System allows deferral of gift and inheritance tax on transfer of unlisted shares under a time-limited special scheme, conditional on an approved plan and follow-up, directly lowering the cash burden at transfer (National Association of Small and Medium Enterprise Promotion Organizations, 2018[49]).

  • Subsidies: Business Succession & Transition subsidies co-finance post-transfer upgrades (e.g., process, product, digital), so the act of succession is paired with investment in modernisation (National Association of Small and Medium Enterprise Promotion Organizations, 2018[49]).

  • Advisory & expert dispatch (Assistance Centres): a nationwide network of Business Succession Support Centres (one in each prefecture) provides over-the-counter advice, expert dispatch and buyer-seller matching to make handovers smoother.

Together, these instruments enable ownership change to be used as a moment for digital upgrading, with national direction and local execution.

Regional dimension

12. Draw on past cluster policy experiences to implement the new Local Innovation Partnership Fund

Rationale

The new UK Modern Industrial Strategy has launched the Local Innovation Partnership Fund (LIPF) to support business innovation at regional level through a cluster-based approach hinged on collaborative relationships between the government, the business sector and universities (i.e., the so-called triple helix). Endowed with public funding of GBP 500 million, the LIPF is expected to generate GBP 1 billion of co-investment and will support the delivery of local growth plans in each of England’s seven established Mayoral Strategic Authorities (MSA) through earmarked funding of GBP 30 million in each12. The Fund is also expected to work with devolved nations, supporting a place in each (Glasgow in Scotland, Cardiff in Wales and the corridor Belfast-Londonderry in Northern Ireland). Besides the block funding of GBP 30 million, each MSA will be able to apply for additional competitive funding for up to GBP 20 million each.

The policy will be implemented through a model shaped after the “local enterprise partnerships” (LEPs), which were the main local development policy of the United Kingdom in the 2010s. Applications will be submitted by partnerships formed by government organisations, the business sector and knowledge organisations for projects that have a clear functional area and an industry and/or technology focus in mind, in line with the concept of business clusters13.

The UK Modern Industrial Strategy already identifies geographical areas that have the potential to drive the development of the eight prioritised strategic sectors through a cluster approach. The South-West, for example, is recognised in the Strategy as home to one of the UK’s largest aerospace and defence cluster; the North-East’s strengths include offshore wind and advanced manufacturing; while the West Midlands’ strengths include automotive, batteries and med-tech.

Proposal

Technology adoption underlies a cluster-based approach to regional development, making the decision of the UK government to invest in this direction particularly suited for technology adoption objectives14. Knowledge spillovers and specialisation (both of companies and workers) are two of the main positive externalities associated with cluster development, as well as two powerful drivers of technology adoption at the firm level.

Cluster development has been a mainstay of regional development policies for many decades, so there are many useful experiences from which the UK government could draw insights for the implementation of this policy. At a more theoretical level, the OECD has argued that key success factors include a strong entrepreneurial culture, a good potential for research commercialisation, a critical human capital mass, skills enhancement policies, strong commitment of both the public and private sector, appropriate incentives in universities and research organisations, access to financing opportunities, and high quality of life (to attract and retain talent). Box 4.2 below also provides some general policy recommendations that can act as checklist for policymakers interested in cluster development.

Box 4.2. General OECD policy recommendations for regional cluster development

The following broad policy recommendations can be considered as a checklist to ensure that the most important dimensions of cluster development are addressed in relevant national and regional policies.

• Encouraging entrepreneurship

  • Supporting spinouts and small firm collaborations

  • Leading a transition to the entrepreneurial university

  • Supporting the launch and growth of startups

• Stimulating innovation and collaboration

  • Fostering industry-research collaboration

  • Encouraging enterprise networks

• Public policy co-ordination

  • Strengthening public-public and public-private partnerships

  • Encouraging evolution in cluster activities

• Ensuring the quality of human capital

  • Updating education and training to meet the requirements of the cluster

  • Ensuring the availability of talent locally

  • Ensuring the appeal of the area and a good quality of life

• Facilitating access to finance

  • Encouraging private investment

  • Facilitate access to public funding

  • Supporting matchmaking events between entrepreneurs and investors

• Reducing congestion costs and social divisions

  • Tackling congestion and social inequalities resulting from the emergence of the cluster

  • Creating mechanisms to inform about the activities of the cluster

Source: OECD (2009[50]), Clusters, Innovation and Entrepreneurship, OECD Publishing, Paris, https://doi.org/10.1787/9789264044326-en

France is one of the countries with the longest experience in cluster development policies. Launched in 2005 as part of the national industrial policy, France's competitiveness cluster policy (pôles de compétitivité, PDC) has been supporting selected clusters organised around a specific territory and common theme. Its primary focus has been the generation of new knowledge through collaborative R&D projects, while also promoting knowledge transfer and the diffusion of technological innovation in later phases.

The PDC has offered two main types of activities to their members: a) non-financial support (partnership building by connecting with other firms and research organisations, technical assistance, legal and financial advisory services, etc); b) financial support (help in securing public funding for collaborative projects).

The policy has evolved through several phases, each with distinct objectives to adapt to changing economic contexts and lessons learned:

• Phase I (2005-2008) and Phase II (2009-2012) – The key objective in these two initial phases was to foster partnership building and improve support of collaborative R&D projects.

• Phase III (2013-2018) – This phase marked a shift towards generating stronger economic and employment outcomes, with growing attention to support for innovative projects until their launch on the market, and a greater focus on SME support.

• Phase IV (2019-2022) – This phase was characterised by outreach at the European level, with the ambition to aim for excellence in high-potential sectors for the future.

• Phase V (2023-2026) – In this phase, the main focus is on fostering regional collaborations, supporting SMEs in market extension at the European level, and in the digital and green transition. This phase also aligns with the strategic plan “France 2030”, which was launched in 2021.

The experience of France’s competitiveness cluster policy reveals several key lessons. Its flexible design has enabled continuous adaptation to evolving national priorities, such as digital transformation, green innovation, and strategic autonomy, while preserving its core role of supporting collaborative R&D and fostering networks among firms and between firms and research institutions. The progressive decentralisation of governance to the regional level has enhanced local engagement but also raised concerns about uneven resources across regions, reduced national co-ordination, and potential fragmentation. Despite maintaining high outreach, membership growth, especially among smaller companies, has slowed down, suggesting natural limits to small business participation in knowledge and technology-based collaborations.

Nonetheless, involvement in collaborative projects has clearly boosted the innovation and technology adoption capacities of businesses, with the smaller SMEs showing the strongest gains in R&D investment, staff, and capital expenditure. Evidence on economic impacts has been mixed. Early evaluations have found no measurable effects, but more recent (internal) assessments suggest that positive outcomes emerge over time, particularly for SMEs (Ben Hassine and Mathieu, 2017[51]; Bellégo and Dortet-Bernadet, 2014[52]; Bellégo et al., 2020[53]).

Canada and Germany offer two other different approaches to cluster development policies. Canada’s Innovation Superclusters Initiative (ISI) – now branded as “Global Innovation Clusters” – was launched in 2018 to boost innovation, commercialisation, and adoption of advanced technologies, especially by small and medium-sized enterprises (SMEs) across different regions. The federal government provides matching funds (up to 50%) for industry-led projects. This reduces the risk for SMEs experimenting with emerging technologies. Projects are commercialisation-focused, not just research. SMEs co-develop new technologies, pilot them in real-world settings, and accelerate market entry. This helps smaller firms move from “prototype” to “product” faster, with backing from industry partners (OECD, 2025[54]).

Germany’s cluster policy (Clusterpolitik) offers a structured yet flexible framework for accelerating innovation and technology adoption among SMEs, particularly in regions outside the main industrial centres. Rather than concentrating resources in a few national “superclusters,” Germany has supported the emergence of hundreds of regional clusters across diverse sectors – from mobility and energy to medical technologies and creative industries. Programmes such as go-cluster, co-ordinated by the Federal Ministry for Economic Affairs and Climate Action, provide management support, benchmarking, and internationalisation opportunities to cluster organisations themselves, which in turn act as intermediaries for SMEs. This approach strengthens the connective fabric between small firms, larger companies, and research institutions, ensuring that SMEs can access new technologies, training, and collaborative R&D projects in their immediate region. Importantly, Germany’s cluster strategy is network-driven rather than top-down. Federal and Länder governments co-finance cluster initiatives, but clusters are expected to emerge from regional industrial strengths and bottom-up demand. Policymakers view cluster organisations as “innovation brokers”: they lower the transaction costs for SMEs engaging in collaborative projects, spread good practices across firms, and help anchor applied research locally (OECD, 2025[55]).

13. Launch a national rural tech adoption programme

Rationale

Cluster policies typically target productivity gains in leading and emerging high-tech regions. However, there is a risk that technology adoption gaps widen further if other more peripheral regions do not receive comparable support for technology adoption. This is especially true in the United Kingdom, where regional income inequalities are deep and also affect technology adoption. As seen in chapter 2, London and the South-East lead on the adoption of most technologies, while the North-East lags behind (Mahmood, Ashgar and Kousha, 2024[56]). Within-region gaps are also significant: for example, in the West Midlands, the Black Country underperforms other regional Local Enterprise Partnerships (LEPs) areas on most innovation funding indicators (West Midlands Combined Authority, 2020[57]). In rural and peripheral areas these patterns are compounded by infrastructure bottlenecks, notably grid capacity and broadband accessibility, which raise the cost and risk of technology upgrading (Culkin, 2024[58]).

The OECD considers rural innovation as innovation happening in rural areas, which are areas with low population density. Rural technology adoption is therefore not limited to agriculture or farming. It includes process and organisational improvements, service and social innovation, and sector upgrades in tourism, light manufacturing, construction, care, the visitor economy and agri-food. The United Kingdom already has useful practices to build on. Grounded in local demand, the Rural Design Centre (RDC) and Rural Catalyst (RC), both in the region of the North-East, work with residents, SMEs and public services to define problems, co-design practical solutions and pilot them in real settings before eventual scaling. These experiences show that, with close support and practical testing, technology adoption can also progress in low-density settings. While the channels through which digital and automation tools raise productivity, are similar in urban and rural areas, the policy challenge in low-density settings is that structural constraints can slow adoption and limit access to support. Targeted assistance can therefore help ensure that rural places are not left behind, so that productivity gains translate into broader local growth and resilience.

A rural-focused diffusion programme could complement cluster policies by scaling up the RDC/RC approach via a network of locally hosted hubs supported by an agile national policy framework. The suggested model would keep national ambition while relying on local delivery: simple standards for advice and data, short diagnostics, hands-on help during implementation, and clear routes to scale solutions through local partnerships.

Proposal

It is suggested that the United Kingdom launch a rural technology adoption programme targeting places that are falling behind on technology uptake. As abovementioned, the definition of rurality in this report follows OECD territorial definitions and refers to areas with low population density rather than only agricultural areas. The objective would be to help rural and peripheral SMEs adopt proven technologies that raise productivity, widen access to services, and connect firms to new supply-chain opportunities. A practical way to do this would be to extend the approach already used by the Rural Design Centre and Rural Catalyst. A key objective would be to avoid a two-tier offer by ensuring that low-density areas have access to a comparable support offer, with delivery adapted to local constraints. This method is established in the United Kingdom and could be replicated in other regions with light adjustments rather than creating an entirely new model.

Delivery could be organised through locally hosted Rural Design Hubs embedded in combined authorities, councils or non-profit organisations. These hubs refer to a delivery function, not a new physical centre. A small national support framework (e.g., a unit in a government department) could set common standards, protect supplier-neutral advice, provide funding, and collect simple and comparable data. The rest would remain local: one front door for firms, short diagnostics, hands-on help during implementation, and clear routes to scale solutions through local partnerships. To avoid duplication, delivery could be co-ordinated with existing local business support offers (including Growth Hubs), with clear referral routes between general business support and hands-on adoption implementation support in low-density areas. This balance would keep the offer understandable and close to the ground while ensuring basic consistency across regions.

The structure could mirror the four core functions of Canada’s Community Futures Program (CFP) and apply them to technology adoption:

• Strategic community planning would be kept light and continuous: each hub would publish a concise plan, setting three to five priorities, a small pipeline of client firms, and one or two community pilot programmes.

• Business services would focus on technology adoption rather than generic business advice, combining a brief diagnostic, a simple plan, and three to six months of practical support to configure tools, migrate data and train staff.

• Access to capital would be modest and fast: implementation vouchers for software, integration and training, and small revolving loans for larger upgrades such as basic automation or management systems.

• Community-based projects would fund small pilots that remove shared bottlenecks in low-density areas such as tele-services, shared equipment or digital hubs, so that multiple firms and service providers benefit from a common enabling technology.

Evidence from CFP evaluations in Western Canada and Southern Ontario indicates that firms supported with local advice and small, patient finance recorded higher employment and revenue growth and stronger survival than comparable non-assisted firms (e.g. employment growth around 9.5% versus 4.2%, and five-year survival around 76-88% versus 60-66%) (OECD, 2017[59]; Industry Canada, 2014[60]). To reflect lessons from CFP, the programme could include supplier-neutral advice without commissions, light checks for funded purchases (such as comparable quotes), brief proof of use, and reallocation of loan funds that remain unused for too long, so capital does not sit idle. Governance can remain proportionate: a small local board with SMEs and local public intermediary representatives could set priorities and review progress, while the national framework would keep reporting simple and transparent.

A phased start would limit risk and build confidence. An initial pilot in 10-12 rural and peripheral areas for two years, prioritising places with clear adoption gaps and, where possible, existing Rural Design capacity, would allow methods and data systems to bed in. Expansion could follow if results are positive. The overall intention would be to scale what already works in the United Kingdom and add the CFP elements to it: small finance, community governance and a light national framework, so successful pilots can be scaled across more places.

14. Strengthen collaboration and learning across local areas in technology adoption policies

Rationale

The United Kingdom’s multilevel governance (MLG) of technology adoption policies mostly operates through ad-hoc consultative processes on specific strategic documents, such as the Technology Adoption Review and the new Modern Industrial Strategy, while there are no standing consultation mechanisms between national and subnational governments or between public and private actors that are specifically focused on technology adoption. Most stakeholders seem to value this approach, although a minority have suggested that more formal channels are better placed to enable more sustained, longer-term dialogue.

At the local and subnational level, collaboration is predominantly informal, rooted in local initiatives and close-knit networks of practitioners. This flexibility supports responsiveness and context-sensitive delivery where local actors have autonomy. However, it is also fragile and uneven across local areas. Learning is not systematically captured, the diffusion of effective practices is inconsistent, and knowledge can be lost when staff change or funding ends, limiting the scale and continuity of learning.

Universities are widely recognised as pivotal partners for delivery, contributing with expertise, skills, applied research, and place-based leadership, yet many reported a lack of clear channels into national strategy-making. In response, some have created liaison structures (e.g. Universities for North-East England) to interface with combined authorities and other government authorities. These solutions underline both the value of stronger institutional links and the cost of their absence: institutions are building their own intermediaries because governance frameworks do not yet provide them (Brekke, 2020[61]).

Strengthening multi-level governance would preserve the agility and local responsiveness that stakeholders prize, while adding light-touch but durable structures for role clarity, sustained dialogue, and evidence sharing across levels of government. Crucially, collaboration across local areas should be led by subnational entities (e.g. combined authorities, local authorities and devolved administrations), with the centre acting as facilitator and co-funder to ensure continuity and a shared knowledge base.

Proposal

It is suggested that the United Kingdom establish a subnational-led Collaboration Platform across local areas on technology adoption with a rotating subnational chair and a light, centrally funded secretariat. The platform could convene one large annual meeting per year and run communities of practice focused on practical adoption challenges (e.g. SME digital operations, data governance, AI in services). Core membership would include subnational governments across the United Kingdom (e.g. Combined Authorities, Mayoral Strategic Authorities, devolved nations, etc), key national government departments (e.g. DSIT, DBT), national delivery bodies (Innovate UK), and knowledge partners like the Catapult Network, Growth Hubs, universities and local research/technology organisations.

The role of the national government would be to facilitate and co-fund the platform, as well as feeding subnational experiences into the national policymaking process. To reduce the administrative burden on subnational participants, the national government could also co-develop with platform members a practical implementation toolkit, including for example a rotating-chair manual outlining the annual agenda-setting process, chair responsibilities, minimum deliverables, and calendar. The rotating chair would take responsibility for setting the annual agenda and organising the annual meeting. This approach aligns with OECD guidance on effective intergovernmental contracts, which emphasises reducing information asymmetries, establishing shared objectives, clarifying roles and accountability, agreeing on indicators, and defining credible review mechanisms (OECD, 2022[62]).

A relevant example is Sweden’s Forum for Sustainable Growth and Regional Attractiveness15, a formal multi-level, multi-stakeholder16 forum that sustains dialogue between national and regional policy leaders through standing groups and working parties (OECD, 2022[62]). It is led by the state secretary for regional growth policy and convenes regular plenaries to share evidence and co-ordinate priorities. Since 2022, Sweden has institutionalised a successor, the Forum for Sustainable Regional Development (2022-2030), with two tiers: a political forum (politikerforum) and a senior technical forum (Tjänstepersonsforum). This forum is supported by a light secretariat at Swedish Growth Agency (Tillväxtverket), meets four times per year at each level (eight meetings in total), and includes all regions and the Swedish Association of Local Authorities and Regions.

A second relevant case is Italy’s State-Region Conference (Conferenza Stato-Regioni), the standing forum for structured consultation and agreements between the central government and the regions. The Conference convenes regularly to align national priorities with regional strategies, issues opinions and agreements on matters affecting the regions, and has been instrumental in co-ordinating EU-funded regional development (e.g., agreeing national strategic frameworks and Partnerships/Programming arrangements), helping ensure coherence while tailoring delivery to regional needs (OECD, 2014[63]).

15. Develop a technology adoption survey to design better-informed policies

Rationale

The United Kingdom lacks a consistent, enterprise-level view of which technologies firms use, at what maturity, and with what outcomes across regions, sectors and firm size bands. Existing official instruments only offer partial coverage:

• The UK Innovation Survey (UKIS) is invaluable for innovation inputs and outputs but is biennial and not designed to track specific digital technologies (cloud, ERP/CRM, AI, robotics, IoT, cybersecurity practices) or their adoption at a granular regional level.

• The ONS Business Insights and Conditions Survey (BICS) gives fast pulses but only occasionally covers technology and cannot provide a stable, longitudinal picture of technology adoption and its barriers.

• The ONS Digital Economy Survey measures ICT use and e-commerce (including software, cloud and cybersecurity items), but was paused for the 2023 reference year, as a result, the latest published results are from 2021. Furthermore, the survey does neither track adoption maturity by technology nor provide stable longitudinal coverage by region and size.

• The UK Business Data Survey (DBT/ONS) focuses on data assets, use, governance and skills; it is informative on data practices but is not designed to map the broader range of digital technologies and systems firms use, or to track adoption maturity across firms.

Recent policy work has underlined this gap. The SME Digital Adoption Taskforce explicitly calls for better, regular data to inform targeted support and to track progress by firm size, sector and place. Internationally, the EU has moved from the Digital Economy and Society Index (DESI) to the annual State of the Digital Decade framework to monitor progress toward 2030 digital targets, signalling the importance of consistent, comparable measurement, including for SMEs. The OECD’s enterprise ICT-use standards likewise exist to ensure cross-country comparability of digital adoption indicators (SME Digital Adoption Taskforce, 2025[64]).

A new UK Tech Adoption Survey could close the evidence gap by capturing, at enterprise level and with consistent breakdowns by size, sector and region, indicators not covered by existing surveys, including:

• Adoption by technology and stage of use (cloud services; ERP/CRM; AI; robotics; IoT; cybersecurity), including a simple maturity ladder (e.g., exploring, piloting, implemented, scaled).

• Depth and integration of use: which processes are covered, whether data and invoices move automatically between systems.

• Delivery model and skills, i.e., in-house vs. external providers, presence of ICT specialists and staff training hours linked to the technology implemented.

• Cybersecurity practice & incidents: use of two-step sign-in, keeping software up to date, having recent backups and knowing they can be restored; any breaches and approximate cost.

• Outcomes and barriers: a small, standard set (lead times, online-sales share, energy use where relevant, payback time; barriers like skills/time/finance/vendor lock-in).

Such a survey would also create a baseline to evaluate forthcoming AI and digital policies, and to align UK statistics with OECD/EU comparators for international benchmarking.

Proposal

The UK Government could commission a new, annual, Enterprise Tech Adoption Survey with a short quarterly pulse, built on the ONS business register and designed for linkages (under standard safeguards) to administrative data such as VAT/PAYE and Companies House. Questionnaire modules would follow OECD/Eurostat ICT-use wording to ensure international comparability, measuring both adoption maturity (trial/pilot/partial/embedded) and use intensity (e.g., share of staff/processes covered). To minimise burden, the survey would be web-first with phone/email follow-up only for non-respondents; it would use short topic modules that rotate by quarter so each business answers only a subset each time; and it would apply simple skip-logic so firms see only relevant questions (e.g., if a firm does not use cloud services, all cloud follow-ups are hidden).

In parallel, the government could set up a UK-wide operational-data pipeline – standardised across regional providers (e.g., Growth Hubs in England and devolved-nation equivalents) – to produce a monthly, near-real-time (“nowcast”) snapshot of SME technology adoption. Providers would submit a few standard fields drawn from (i) their support databases, (ii) website enquiry forms, and (iii) a short adviser diagnostic. Each record would include the firm’s Company Registration Number (CRN), so duplicate records can be removed and, under standard safeguards, the data can be securely linked to official business records. The pipeline would return only de-identified, regional aggregates to inform policy and programme management.

The annual wave of the survey would provide the detailed map: technology coverage (cloud, ERP/CRM, e-commerce, cybersecurity, data practices, AI use-cases, robotics/IoT), adoption maturity levels (from trial to embedded), barriers and enablers, spending, and early outcomes (time saved, error rates, sales channels), with full disaggregation by region, sector and firm size. The quarterly pulse would track a small, stable set of indicators (e.g., first-use of AI by function, cloud intensity, cyber incidents, investment intentions), offering timely signals for policymakers while keeping burden low.

Design should prioritise compatibility with the OECD/Eurostat ICT-use model survey, so select questions can be benchmarked internationally and include a published crosswalk to the EU’s State of the Digital Decade enterprise indicators (formerly DESI). In the United Kingdom, a short “bridge” module that repeats 2-3 UKIS questions would allow consistent comparison with UKIS concepts while avoiding duplication.

The design mirrors proven models: the EU’s annual ICT-usage in enterprises survey (harmonised across Member States since 2002) demonstrates feasible core indicators and benchmarking; Singapore’s IMDA Annual Survey on Infocomm Usage by Enterprises shows a practical national, sector-disaggregated implementation; and Canada’s Survey of Digital Technology and Internet Use (SDTIU) provides a business-level instrument focused on technology stack, barriers and outcomes.

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Notes

← 1.  In practical terms, for example, carry-forward provisions and cash-refunds improve the R&D tax credit’s conditions for loss-making firms, whereas enhanced tax credit rates improve the terms for SMEs.

← 2.  Until 2024, the UK operated two main R&D tax relief schemes: the SME scheme and the R&D Expenditure Credit (RDEC) for larger firms. Following recent reforms, these have been brought together into a single expenditure credit regime, with a separate, more generous regime retained only for R&D intensive SMEs (https://www.gov.uk/guidance/research-and-development-rd-tax-relief-the-merged-scheme-and-enhanced-rd-intensive-support).

← 3.  The only firm-size exception is for loss-making, R&D intensive SMEs (i.e., those spending at least 30% of total costs on R&D) which receive an additional deduction of 86% of qualifying R&D expenditure, delivering a net benefit of up to 27%. For further information, see: https://www.gov.uk/guidance/research-and-development-rd-tax-relief-the-merged-scheme-and-enhanced-rd-intensive-support

← 4.  See T2 Corporate Scientific Research and Experimental Development (SR&ED) Statistics, https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/income-statistics-gst-hst-statistics/t2-corporate-scientific-research-experimental-development-statistics.html

← 5.  See: https://www.sreducation.ca/sred-statistics.

← 6.  The programme provided financial assistance through two streams: Grow Your Business Online (GYBO), offering grants of up to CAD 2 400 for e-commerce adoption; and Boost Your Business Technology (BYBT), which covered 90% of costs up to CAD 15 000 to work with a digital-adoption expert, plus interest-free loans of up to CAD 100 000 through the Business Development Bank of Canada.

← 7.  Cell and Gene Therapy, Compound Semiconductor Applications, Connected Places, Digital, Energy Systems, High Value Manufacturing, Medicines Discovery, Offshore Renewable Energy, and Satellite Applications.

← 8.  Studio Schools were small, state-funded institutions for students aged 14-19, introduced in the 2010s, that delivered employer-led, project-based curricula with regular work placements. While many have since closed or been re-brokered, a small number remain (e.g. The Studio School Liverpool; Waverley Studio College).

← 9.  Foundations, access and digital understanding; Information and data; Communication, interaction and collaboration; Digital content creation, production and publication; Safety and sustainable use of resources; Problem solving, innovation and continuous learning.

← 10.  Foundation: elementary; Foundation: solid; Intermediate: well-founded; Intermediate: in-depth; Advanced: comprehensive; Advanced: in-depth; Highly specialized: strategic; Highly specialized: innovative.

← 11.  For example, Innovate UK Business Connect describes its role as connecting innovators with partners, expertise and funding opportunities through thematic networks and events, while the UK Tech Cluster Group brings together regional tech organisations to support and promote local digital ecosystem.

← 12.  The seven MSAs are: Greater Manchester, West Midlands, West Yorkshire, Liverpool City Region, South Yorkshire, the North-East and Greater London.

← 13.  Clusters are generally defined as geographic concentrations of interconnected companies, specialised suppliers, service providers, firms in related industries and associated institutions in particular fields that compete but also co-operate

← 14.  Besides the LIPF, the UK government is also planning to launch a Local Growth Fund, which will consist in a 10-year capital settlement from 2026-27 for specific mayoral city regions in the North and Midlands which have the highest productivity catch-up and agglomeration potential.

← 15.  The original Forum for Sustainable Regional Growth and Attractiveness operated in 2015-2020, was extended through 31 December 2021 (with a name update), and in February 2022 the government re-established a forum for 2022-2030 within the Government Offices, with Tillväxtverket (the Swedish Growth Agency) providing the secretariat (Näringsdepartementet, 2022[65]).

← 16.  For example, central government, central government agencies, regional governments, municipalities, third sector and the private sector.