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Barriers to digitalisation a concern for SME recovery

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Key driver: Vodafone Ireland CEO Anne O'Leary. Photo: Naoise Culhane

Key driver: Vodafone Ireland CEO Anne O'Leary. Photo: Naoise Culhane

Key driver: Vodafone Ireland CEO Anne O'Leary. Photo: Naoise Culhane

Barriers to adopting new technologies threaten the recovery for SMEs, especially in hard-hit rural areas, according to new research conducted by University of Limerick economist Stephen Kinsella for Vodafone.

The study found that nearly three in five small businesses have a willingness to invest in digitisation but face several hurdles including high cost, low trust in suppliers and a lack of in-house capabilities to implement digital strategies.

As a result, just 19pc of smaller Irish firms are ‘highly digitalised’, while just 24pc of larger firms are.

The report found that although technology has helped many businesses adapt throughout the pandemic, many SMEs are now recognising the need to make significant changes to their digital infrastructure, but lack the capacity to make them.

“Digitalisation was identified as a key driver for this recovery, with noteworthy growth potential for Irish SMEs who engage in digital transformation,” said Vodafone Ireland CEO Anne O’Leary. “However, as has been captured, due to the demographic make-up of Irish SMEs, of which the vast majority are micro-businesses, their ability to make the capital investment required is challenging.

“Therefore, as the cornerstone of Ireland’s economy and a core driver of post-pandemic economic recovery, it is of the utmost importance that financial support and practical policies are in place to allow SMEs invest in digitalisation and compete with EU and global SMEs within the digital economy.”

The research chimes with similar findings from Bank of Ireland’s monthly Economic Pulse survey.

Bank of Ireland found firms identified infrastructure as a headwind for the recovery, with telecommunications topping the list for areas needing investment, given demand for e-commerce and increased remote working.

The survey found 36pc of firms believed telecoms in their region required further investment twice the figure in pre-Covid surveys.

Overall, the survey found economic sentiment has improved over the last month as businesses and households have begun to look past the current lockdown towards a future recovery.

The survey found that 46pc of households believe the economy will get better in 2021, up from a figure of 35pc in January. Four in 10 said unemployment was likely to fall as well.

Meanwhile, businesses were downbeat about the current economic situation under lockdown and post-Brexit disruption, but most were expecting an improvement in activity and hiring as the year progressed.

“Both consumer and business sentiment were up on the month as households and firms looked towards the economic recovery now that the vaccine roll-out is under way,” said Loretta O’Sullivan, Bank of Ireland chief economist. “Of course, it will be a while before we get back to ‘normality’ and it may be that some of the pandemic-induced changes to the way we live, work and shop persist, with longer lasting implications for the economy.”

The Economic Pulse surveys 1,000 households and approximately 2,000 businesses on a range of topics including the economy, personal finances and business activity.

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