Starling Report Reveals Digital Financial Tools Could Unlock £25.3bn Boost for UK SMEs

New research from Starling Bank suggests that greater adoption of digital financial tools by small and medium-sized enterprises (SMEs) could add £25.3bn to the UK economy and help close the productivity gap with countries such as France and Germany.

The study, based on an online survey of 1,000 UK SME decision-makers conducted between 23 October and 7 November 2025, highlights the scale of time and cost burdens associated with manual financial administration — and the opportunity presented by digital solutions.

SMEs account for 99% of UK businesses and, according to the research, spend an average of £63,000 per year managing their finances. Wider use of digital tools for tasks such as bookkeeping, invoicing and tax returns could enable businesses to redirect time and financial resources towards innovation and customer growth.

Adeel Hyder, Managing Director of SME Banking at Starling Bank, said:

“Small businesses are the backbone of the British economy, but they are being held back by a ‘hidden tax’ on their time. 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 84% of SMEs already use digital tools for some financial tasks, 48% do not expect to increase their usage. Barriers include entrenched processes and concerns around cost. However, where digital tools are implemented, SMEs report an average time saving of 41% compared with manual processes.

The projected £25.3bn increase in Gross Value Added (GVA) is nearly double the economic contribution of the UK agriculture sector, underlining the potential macroeconomic impact of improved digital adoption among SMEs.

According to the research, additional growth of this scale could also generate an estimated £10.4bn in new tax receipts, based on an Office for Budget Responsibility tax-to-GDP ratio estimate of 41.2% for the coming fiscal year. This would exceed the revenue raised by adding 1p to the basic, higher and additional rates of income tax combined.

Policy recommendations

Starling is presenting five key recommendations to the Government:

• Dismantle the Affordability Perception Gap by creating an online ‘Financial Tool Cost Calculator’ within the Government’s Business Growth Service.
• Target Support towards microbusinesses and female-led companies in digital adoption pilots.
• Collaborate on Support Ecosystems by co-developing advisory tools with trusted intermediaries such as accountants and industry bodies.
• Embed Digital Financial Tools in Government Initiatives to prioritise solutions that deliver measurable time and cost savings.
• Integrate Digital Adoption into National Mentoring Programmes, including through the new Business Mentoring Council.

Michelle Ovens CBE, CEO and Founder of Small Business Britain, contributed to the report. She said:

“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.”

Relevance for Wales

Starling is headquartered in London and has offices in Southampton, Manchester and Cardiff. Its presence in Wales reflects the strength of the country’s growing fintech ecosystem and the increasing importance of digital banking infrastructure to SMEs across the UK.

For Welsh SMEs — which, like the wider UK, make up the vast majority of the business population — greater adoption of digital financial tools could play a meaningful role in improving productivity, strengthening resilience and supporting sustainable growth.

The full report, How digital financial tools can unlock SME growth, is available here:
https://www.starlingbank.com/docs/reports-research/starling-how-digital-financial-tools-can-unlock-sme-growth.pdf

More information about Starling’s free Making Tax Digital tool is available here:
https://www.starlingbank.com/business/making-tax-digital/