Why did 'Help to Grow Digital' fail?

Why would SMEs turn down free money to help them digitise?

A post-pandemic £296 million government scheme to subsidise software investment by SMEs announced in 2021, spent barely 7% of that by the time it was quietly abandoned in December 2022.

Initial numbers given by the Department for Business, Energy & Industrial Strategy (BEIS) indicated that the scheme had managed to spend around £31 million. This would have meant that each successful application which had a maximum value of £5000 would have cost the taxpayer approximately £40,000.

However, further analysis has revealed the actual spending for the three financial years of the SaaS credits program (2021/22 to 2023/24) was actually due to be nearer to £20 million, the Department told The Register.

When the then Chancellor Rishi Sunak announced the Help to Grow Digital scheme in the Spring budget of 2021, it was hoped that 100,000 SMEs would take part. During his budget speech on 3rd March 2021 Sunak said:

"With the pandemic, many businesses have moved online. This has been a challenge. But we want to turn it into an opportunity.

"We're going to help small businesses develop digital skills by giving them free expert training and a 50% discount on new productivity-enhancing software, worth up to £5,000 each.

"Both programmes will commence by the autumn; and I'd urge interested businesses to register today on Gov.UK/HelpToGrow.

"A real commitment to help over a hundred thousand businesses become more innovative, more competitive and more profitable."

What went wrong?

The reality was rather less impressive, according to a final evaluation of the scheme published in January.

The scheme was open for just over a year. In total, 1507 applications were received, of which 130 were not eligible. Of the 1377 vouchers issued, only 830 were redeemed.

The thinking behind Help to Grow was positive. The UK lags behind other countries in its pace of digitisation, and SaaS adoption among SMEs is lower relative to some of our international competitors. The government reaffirmed its commitment to the scheme in the 2022 Spring budget and expanded the availability of the scheme that summer to include SMEs consisting of a single employee.

What went wrong? The evaluation by the BEIS reads like a parable of how a good idea with sound logic at its core often seems to succeed in delivering precisely the opposite outcomes to those intended, at immense cost to the taxpayer.

Firstly the scheme wasn't sufficiently marketed. The SMEs it should have targeted simply didn't know about it. There was also a highly limited choice of software types and vendors. In the digital accounting software options, just three vendors were listed. There was also inflexibility about how the discount voucher could be used and insufficient consideration given to how businesses could deploy this software and train staff to use it.

Essentially, the design and communication of the scheme was too narrow. This could have been picked up at an earlier stage if those implementing the scheme had engaged and invited the input of organisations who represent the SME sector - the Federation of Small Businesses for example or Local Enterprise Partnerships. The failure to do this meant that shortcomings that could have been rectified at an early stage were not identified.

The report identified the fact that those who did successfully utilise Help to Grow Digital were already quite digitally aware. They recorded a high degree of satisfaction with the scheme, and mostly confirmed that it has improved productivity and efficiency. The majority were in London and the South-East. It is likely that the scheme simply subsidised 830 companies to do something that they were going to do anyway.

NHS Underspend

Also launched in 2021 and on course for an underspend in 2023/24 according to HSJ was the NHS Frontline Digitisation programme. It's not difficult to see why these funds for digital transformation might be struggling to reach frontline projects.

Late last year Digital Health reported that NHS England have reduced digitisation budgets by approximately £350m because of huge gaps in funding elsewhere.

The Frontline Digitisation programme was supposed to have 90% of all trusts delivering Electronic Patient Records (EPR) to an acceptable standard by the end of last year, and 100% by March 2025.