SME use of digital financial tools could add £25bn to the economy

Greater adoption of digital financial tools by small and medium-sized enterprises (SMEs) could unlock an additional £25.3bn for the UK economy and help close the productivity gap with European peers such as France and Germany, according to new research from Starling Bank.

SMEs account for 99% of UK businesses, yet Starling’s survey of 1,000 business owners found they spend an average of £63,000 a year managing their finances. The study suggests that wider use of digital tools for routine tasks such as bookkeeping, invoicing and tax returns could significantly reduce both time and cost burdens, freeing business owners to focus on innovation, growth and customer acquisition.

“Small businesses are the backbone of the British economy, but they are being held back by a hidden tax on their time,” he said. “Our research shows that a large number of SMEs believe digital tax software alone costs nearly £12,000 a year, when in reality that’s fifteen times the price of some high-end solutions. For our part, Starling’s Making Tax Digital for Income Tax tool will be free from launch in March, so we can help entrepreneurs swap admin hassle for productivity gains.”

While digital adoption is already widespread, with 84% of SMEs using digital tools for at least some financial tasks, nearly half (48%) do not expect to increase their usage. Many report feeling locked into existing processes or concerned about the perceived cost of switching to new systems. Where digital tools are used, however, SMEs reported average time savings of 41% compared with manual processes.

Starling estimates that an additional £25.3bn in economic output would be nearly double the size of the UK agriculture sector’s contribution to the economy, underlining the potential impact of improved SME productivity. The bank argues that accelerating digital adoption could play a meaningful role in narrowing the UK’s productivity gap with other G7 nations.

The report also highlights the potential fiscal benefits. With the Office for Budget Responsibility forecasting a tax-to-GDP ratio of 41.2% in the coming fiscal year, an extra £25.3bn in Gross Value Added could translate into around £10.4bn in additional tax receipts. This would exceed the revenue expected from adding 1p to the basic, higher and additional rates of income tax combined.

In response to the findings, Starling has set out five recommendations for government to accelerate SME adoption of digital financial tools. These include creating a government-backed online cost calculator to address misperceptions around affordability, targeting support at microbusinesses and female-led firms, and embedding digital finance tools more deeply within existing government-backed business support and mentoring programmes. The bank also called for closer collaboration with accountants and industry bodies, which it says remain the most trusted intermediaries for small business owners.

“The digital gap is not just about technology; it is about trust and community. We know that small businesses are keen to adopt AI but can be held back by barriers like lack of support, which can be particularly challenging for under-represented entrepreneurial groups.

“This report’s recommendation to build a ‘trusted support ecosystem’ is vital for all small businesses. There is huge opportunity for digital technology to boost UK growth, innovation and resilience, as well as levelling up opportunity for all. To do this effectively we need to meet business owners where they are, through their accountants, mentors, and local and peer networks, to give them the confidence to take that next digital step.”

The research is based on an online survey of 1,000 UK SME decision-makers conducted between 23 October and 7 November 2025.