Digital Economy Business Survey 2021: findings

Introduction

Scottish Government’s Programme for Government 2020-2021 recognises the importance of digital infrastructure and technology in supporting economic growth, boosting productivity, driving innovation and supporting business resilience in the face of economic crisis.

Scotland’s refreshed Digital Strategy, A changing nation: how Scotland will thrive in a digital world, published in March 2021, sets out the Scottish Government’s vision for Scotland as a vibrant, inclusive, greener, open and outward-looking digital nation. Key to achieving these ambitions is supporting the development of internationally competitive, digitally mature businesses that are inclusive, ethical and user focused across all sectors of the Scottish economy and a workforce that has the digital skills required to support continued growth.

As part of Scotland’s Digital Strategy, the Scottish Government and its agency partners committed to monitoring developments in the level of digitisation amongst Scottish businesses, and to measure changes in digital maturity.

The first Digital Economy Business Survey was conducted in 2014 with the purpose of providing a baseline understanding on the level of digitisation of Scotland’s businesses, allowing for benchmarking and progress to be measured over time. In order to assess digital progress amongst Scottish businesses since the baseline survey in 2014, the Scottish Government, together with its partners Scottish Enterprise, Highlands and Islands Enterprise, South of Scotland Enterprise and Skills Development Scotland, commissioned Ipsos MORI to carry out the follow-up 2017 and 2021 Digital Economy Business Surveys.

The purpose of the 2021 Digital Economy Business Survey was to:

• Track how Scottish businesses have evolved in relation to digital adoption, usage, exploitation and skills, since the baseline survey in 2014 and follow-up survey in 2017;
• Provide an insight into the areas businesses may require extra support to improve their adoption and exploitation of digital technology; and
• Provide an insight into new areas of focus, such as digital skills, productivity, cyber resilience and E-Commerce.

This report presents the high-level results from the survey. Comprehensive results from the survey, including breakdowns by firm size, sector, and area are available in the accompanying data tables which can be found as a supporting file alongside this publication.

Additional breakdowns are provided for the first time in the 2021 data tables including: number of establishments, location, organisation type, internet connection, use of digital technologies, number of technologies, investment in digital technologies, exporting markets, E-Commerce, cyber security, digital skills, annual turnover, private sector growth plans and length of time business has been operating.

Using data from the Digital Economy Business Survey, the Scottish Government has developed a Digital Economy Maturity Index (DEMI), which allows for the segmentation of businesses in Scotland according to their level of digitisation. DEMI is constructed using a range of indicators from the Digital Economy Business Surveys. The original DEMI was developed in 2014 and has since been updated for 2017 and 2021 to reflect new areas of interest. The 2021 DEMI can be found as a supporting file alongside this publication.

Highlands and Islands Enterprise and South of Scotland Enterprise have published summaries of relevant regional findings, available on their websites.

Key findings from the survey

Businesses differed in terms of their size, sector, location, length of operation and future growth aspirations. Digitally mature businesses tended to be larger, operating for less than ten years, and with expectations of growth in the next 12 months. They were more likely than average to be working in business activities, and to be based in Glasgow, Lothians, Central Scotland or the North East. Conversely, the less mature tended to be smaller, established for at least 10 years, and with expectations to remain at the same level or contract in the next 12 months. They were more likely than average to be working in agriculture or construction, and to be based in the South of Scotland.

This report presents high level findings from the survey. The data tables published alongside this report contain breakdowns by a number of factors, including business size, sector, location, turnover, and business growth, as well as cross-references with key findings in other sections of the survey. It is recognised that there is significant variation across businesses in different sectors and different parts of Scotland, and that digital maturity is not static. Additional analysis is being undertaken and findings from this survey will be important in informing the development of current and future policy in Scotland.

• Internet connection: 97 per cent of businesses surveyed in 2021 had an internet connection, unchanged from 2017, but higher than 94 per cent of businesses surveyed in 2014.
• Adoption of technologies: As in 2014 and 2017, the most widely adopted digital technologies were making use of mobile technologies (83 per cent), and having a company website (76 per cent). The share of businesses using Cloud computing almost doubled from 2017 (74 per cent up from 38 per cent) and overtook social media (72 per cent) as the third most used technology in 2021.
• Importance of specific technologies: Businesses using mobile internet and technologies (59 per cent), remote working tools (55 per cent) and the company website (54 per cent) were most likely to rate these technologies as essential to the way the business operates.
• Reasons for not using technologies: 2 per cent of businesses used none of the listed digital technologies, compared to 6 per cent in 2017 and 10 per cent in 2014. The most commonly cited reason for not using any of the listed technologies was that the technology in question was not relevant to the business (65 per cent).
• Benefits of using technologies: The perceived benefits from making use of digital technologies were similar to those cited in 2014 and 2017. Benefits range from:
  • technologies generating exposure of the company and that it has increased responsiveness to customers (website and social media); to
  • allowing for greater flexibility and remote working (mobile internet and technologies and cloud computing); and
  • better marketing (data analytics) and increased efficiency (management software).
• Productivity: Three quarters (75 per cent) of businesses reported that digital technologies had positively impacted their productivity, innovation and/or low carbon working. The greatest impact experienced by businesses was that digital technologies helped make their processes more efficient (59 per cent).
• Innovation: A third (33 per cent) of businesses reported that digital technology had impacted innovation by helping the business create new or significantly improved products or services.
• Environment: A third (34 per cent) of businesses reported that digital technology has supported a shift to low carbon working. Businesses in the business activities (48 per cent) and health/ social work (40 per cent) sectors were more likely than average to report that it has helped a shift to low carbon working.
• E-commerce: Overall, 35 per cent of businesses surveyed in 2021 made sales via e-commerce in the last 12 months, an increase from 30 per cent in 2017. Of those businesses, 63 per cent had made e-commerce sales to other businesses (B2B). The most common action being taken by businesses using e-commerce to maximise their digital presence and support e-commerce activity was search engine optimisation (53 per cent).
• Internationalisation: 27 per cent sold their goods or services to markets internationally (outside of the UK). 24 per cent of businesses sold within the EU and 20 per cent outside of the EU. A variety of challenges were perceived by businesses using e-commerce that would affect their ability to deliver international e-commerce services, including UK exit from EU (10 per cent) and the Covid-19 pandemic (8 per cent).
• Cyber security skills: 30 per cent of businesses felt that they were fully equipped with the relevant skills to protect against and deal with cyber security threats. 14 per cent felt poorly or not at all equipped to deal with cyber security threats.
• Cyber security attack: 28 per cent of businesses have experienced a cyber-attack in the last 2-3 years. The most common attacks were being directed to fake websites (15 per cent) and emails being hacked (11 per cent).
• Skills in the workforce: 21 per cent of businesses stated that their employees were fully equipped with the skills to meet the business’ digital technology needs, down from 26 per cent in 2017 and 37 per cent in 2014.
• Digital skills gaps: A quarter (26 per cent) of businesses reported that they needed to improve basic technology skills such as email, internet navigation, Microsoft Office and Excel.
• Skills development: 29 per cent of businesses were taking action to develop their existing employees’ digital technology skills, down from 34 per cent in 2014. When asked why businesses are not planning to develop their employees’ digital skills, the most common reason was that it was not applicable for business needs (65 per cent).
• Covid-19 Response: 40 per cent of businesses stated that digital technology was essential to the operation of the business in responding to the Covid-19 pandemic and 38 per cent stated that it was important or very important in their response.

Detailed survey methodology

Fieldwork approach

The survey fieldwork was conducted between 22 February and 23 April 2021. In total 3,346 businesses took part in the survey. The majority of surveys (3,316) were carried out using telephone interviewing, with the remainder (30) being completed online (businesses could choose to complete the survey online if a telephone interview was not suitable).

The interviews were targeted at the most relevant person in each business: for smaller business (less than 10 employees) interviews were carried out with the owner of the business; for larger businesses, interviews were carried out with the person responsible for making decisions about the IT systems in the business (Managing Director, IT Manager or equivalent). Sole traders were excluded from the survey.

Survey sample

The survey sample was sourced from the Dun and Bradstreet business database and was stratified by sector and size to reflect the population of Scottish businesses as a whole. The survey sample included additional boost of 1,000 interviews within the Highlands and Islands, and of 500 interviews in the South of Scotland, to allow for further analysis of findings for these regions.

Quotas were set for recruitment and interviewing so that the achieved sample reflected the population of eligible organisations as defined by the Inter-Departmental Business Register. Eligible organisations were defined by Standard Industrial Classification (SIC) code.

For all quotas, a 20% leeway was allowed for, meaning that a minimum of 80% of each quota had to be reached, but no more than 120% of each quota target could be achieved.

Respondent profile

The achieved sample was broadly representative of the population, notwithstanding some differential non-response due to differences in availability and willingness to participate. Weighting was applied to correct the distribution of sectors and size categories to match the sample counts.

The profile of respondents by area, sector and size is shown below: