Poor connectivity is costing British SMEs £18.77bn a year

UK micro-businesses and small to medium sized businesses (SMEs) who provide their employees with work phones are losing out on over one hour of working time per employee, per week, on average, as poor connectivity means that staff cannot get online or complete work effectively. For medium sized businesses, this equates to up to 250 hours of working time per week.

The research, conducted by Three UK in partnership with YouGov and Development Economics, found that:

• Loss of business revenue has a significant impact on the British economy – an estimated loss of economic output (GVA) amounting to £7.7bn every year at a time of sluggish growth
• Professional services and retail sectors are hardest hit by cost of poor connectivity
• The issue is affecting businesses at a challenging time, with almost three quarters of SMEs reducing costs due to the macroeconomic backdrop

The lost working time for British micro-businesses and SMEs equates to reduced business revenues of c. £18.77bn a year on average, according to the research, and means that £7.7bn of output is potentially being lost to the British economy every year.

The areas hit hardest were professional services – including legal, accounting and media businesses – and retail, which are two of the largest sectors in the UK economy. The research found that professional services firms lost £5.3bn in revenue on average per year due to poor connectivity, accounting for an annual output loss of £2.8bn to the economy, while the retail sector lost £3.7bn in revenue per year because of poor technology, resulting in an annual loss of £560m in output to the British economy.

Cost of living and talent crisis

These figures come at a particularly challenging time for businesses. Amidst rising costs and inflation, almost three quarters (71%) of SMEs have been made more aware of areas where they need to reduce spending because of the cost of living crisis, with nearly a third of SMEs (32%) believing they are paying too much for phone contracts and looking to cut costs.

Simultaneously, nearly a third (29%) of SMEs are worried they could lose employees due to not having good technology. This figure rises to almost half (48%) amongst medium-sized businesses, which is especially worrying at a time where talent shortage is impacting most industries.

Lack of support

Having a strong online connection is vital for SMEs to operate and grow their businesses, with over a third (36%) believing that they could perform better if they had better mobile phone connectivity. Meanwhile, one in five SMEs (20%) are concerned that not knowing how to use the latest mobile phone technology could allow their business to be left behind.

A lack of support and knowledge are a barrier to adopting the latest technology for these enterprises, with almost half (48%) of SMEs stating that the technology industry uses complex technical language that they don’t understand.

In response to this ongoing problem, Three, the UK’s fastest 5G network, as recognised by Ookla®, launched its Business Adapt offering last month, offering connectivity and handsets to SME businesses that are tailored towards their needs.

Snehal Bhudia, Director of Business Propositions & Go to Market, Three UK, added:

“As the cost of living crisis continues to bite, it’s alarming to see that £7.7bn is being lost from the UK economy every year due to the poor technology stifling SMEs’ performance. Many technology propositions are aimed at larger corporate structures and fail to meet the needs of smaller businesses in a cost effective way. Technology providers must therefore better tailor their services towards the needs of SMEs; ensuring their offerings are really simple, giving them the tools to understand what’s happening in their business and doing so with a level of service that’s usually only reserved for large corporates.

“At Three, we are investing more than £2bn+ in network technology to become the UK’s fastest 5G network and have recently launched Three Business Adapt to directly tackle these connectivity problems for SMEs. Business Adapt ensures that SMEs can reap the rewards of good technology, great service and unbeatable value, enjoying maximum growth and profitability as a result.”

Tony Gibbons, Technical Manager at Clearway, a Three Business customer, adds: “Connectivity really is at the heart of enabling our business to perform and our employees to do their jobs effectively. Suffering poor connectivity really isn’t an option when you do what we do, but unfortunately we have fallen foul to this before. That’s why the importance of strong connectivity simply cannot be underestimated and that’s exactly why we chose Three Business.  It’s allowed us to be cost effective and to be in complete control too – a no brainer in my eyes.”

Craig Beaumont, Federation of Small Businesses Chief of External Affairs, said: 

“This new research from Three shines a new light on just how poor connectivity can hold UK small businesses back.  It echoes FSB’s own research which shows 45% of small businesses experience unreliable voice connectivity, rising to 57% in rural areas.  We need economic growth and productivity right across the UK, and that rests on world-class digital, mobile and vocal connectivity – 4G and 5G must be inclusive for everyone.  After incredibly tough times, small businesses can use this to innovate, find new customers, and drive the recovery – but they can’t do this if they are battling with poor connectivity.”

Methodology

The research was commissioned by Three and undertaken by YouGov and Development Economics. YouGov surveyed over 1,000 micro and SME businesses based in the UK, to gauge their opinions on usage, understanding, time and monetary costs of technology within businesses. Micro-businesses are defined as having up to nine employees; small businesses are defined as having 10-49 employees; medium businesses are defined as having 50-249 employees.

Development Economics used the survey data, alongside various datasets published by the Office for National Statistics, to estimate the average annual amount of revenue and Gross Value Added (a statistic which measures the contribution made to an economy by an individual producer, industry, or region) associated with every employee working in each industry, with regional differences in averages also accounted for. This allowed for an estimate to be calculated on the cost of poor connectivity on UK SMEs and the resulting impact on the economy. ONS data accessed for use in the report dates from 2019, so is not affected by disruption caused by the 2020-2022 global pandemic event and associated lockdowns.