Small businesses migrate online to stay afloat

One in seven small business owners (14%) say they are transitioning towards becoming fully or mainly online enterprises since the outbreak of the Covid-19 pandemic in the UK, according to new research from Hitachi Capital Business Finance.

The findings come at a time when Facebook has announced the launch of Facebook Shops, which gives small businesses that have suffered amid the pandemic the tools to create online stores on Facebook and Instagram. The new Hitachi data suggests the proportion of small businesses that are offering services fully online, has increased by more than 50% since the period of isolation began – rising from 24% to 38%.

The sectors where small businesses were most set up for online operations before the pandemic struck were retail (43%), IT and telecoms (40%) and media (40%). In the last two months,  the sectors where small business owners have been most urgently transitioning their ventures to online platforms have been education (29%), medical (22%) and finance and accounting (21%). 

The net result is different industry sectors are set to emerge from the lockdown period as the most digitally enabled. Further, the research suggests the pandemic may see a  widening of the tech gap between small businesses – with the gap between the most and least digitally enabled sectors widening from 33% to 45% in a matter of months.

 % of small business that have operated completely or mainly online for a while% of small businesses currently transitioning towards operating completely or mainly onlineNet % of businesses online (established and currently transitioning)
Media & marketing40%17%57%
IT & telecoms40%15%55%
Retail43%10%53%
Finance & accounting31%21%52%
Education20%29%49%
Medical & health services18%22%40%
Hospitality & leisure20%12%32%
Real estate17%10%27%
Transport & distribution12%11%23%
Manufacturing11%11%22%
Construction10%6%16%
Agriculture7%5%12%

By region, the research reveals that the East of England (33%) and Scotland (29%) have now overtaken London as the regions that now have the highest proportion of small businesses online. London (21%), the South West (15%) and Wales (15%) are the regions where small business owners are working the hardest to transition their businesses onto a fully online enterprise. 

Gavin Wraith-Carter, Managing Director at Hitachi Capital Business Finance commented: “In recent years, online and digital capabilities have been seen as desirable goals for many small business owners – for others, a consideration for the future. The shock of the Covid-19 pandemic has changed things overnight. Today, online capabilities are essential, many small businesses need them simply to operate and to stay open for business. 

“Our own research has revealed that offline businesses where more than twice as likely as online businesses to have had to close their doors since the pandemic struck the UK (39% Vs 17%). Furthermore, the online status of a small business in the current climate correlates with growth outlook for the months ahead. For example, 72% of the businesses that predicted significant expansion in the next three months were online businesses. In contrast, 71% of the small businesses that predicted they would struggle to survive were offline businesses. 

“These are stark findings. At Hitachi Capital Business Finance we are investing heavily in our digital channels to support small businesses at a critical time and we expect to see a lot of small business investment and borrowing being directed in enhancing their online capabilities in the second half of the year.”

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