The Government Should Adopt a Digital-Led Approach to Save Britain’s SMEs.
Last year the world moved from paying lip service to digitisation to relying on it. If we are to fully embrace the benefits of digitisation then we need to leverage technology to implement strategic and sustainable change. This starts at the very top.
Earlier this year, the UK Government confirmed £800 million in funding for its ‘blue-skies’ Advanced Research & Invention Agency (ARIA) which will fund research into cutting edge Artificial Intelligence (AI) and data.
This research has immense potential to solve long-standing issues in how we store, process and harness data across both the Government and industry. However, the UK Government needs to ensure a harmonised, inclusive approach so that practical uses for the research can be identified and built in tandem with innovation across both the private and public sectors. One way for the Treasury to protect SMEs in the long term is by harnessing innovative technology through institutions such as ARIA. Adopting technology-driven solutions can ensure that SMEs build steady cash flow and resilient supply chains. This will support long-term recovery without burdening the taxpayer.
In 2019, late payments to SMEs amounted to over £23.4 billion – this figure has increased since the pandemic to a staggering £50 billion. AI enables corporates to identify and flag the very few problematic invoices while paying the rest straight away. This technology allows SME suppliers to be paid instantly while large corporates pay on their normal terms. Small businesses unlock much-needed liquidity while large corporates strengthen their supply chains at minimal cost. A true win-win for business that doesn’t cost the taxpayer a penny.
The Government has taken some steps to tackle the late payment crisis. Most recently, it appointed a new Small Business Commissioner, Liz Barclay, and strengthened the Prompt Payment Code (PPC), which reduces the time businesses must pay SME suppliers from 60 days to 30. However, its efforts fall short of the change needed to unlock the billions held up in slow payments. Technology makes it possible for all corporates to pay suppliers within 24 hours. If AI was integrated into payment systems at scale, the PPC would be rendered redundant. The Government needs to play its part in bringing about a cultural shift in B2B commerce, where prompt payment matches that of the B2C world. After all, a customer couldn’t go into Starbucks and order a coffee, promising to pay in 30 days. Punitive measures can only go so far to prompt this change. Technology is the key to unlocking a new era of equitable B2B payments.
The Government plainly understands the role of data in the UK’s future but must ensure a coordinated approach to create innovative solutions that truly benefit Britons. ARIA is often dubbed the ‘blue skies’ research agency. Aiming high in pursuit of change should certainly be applauded. However, Government inter-departmental coordination and collaboration with industry remain crucial for the agency to be effective. Harnessing AI to tackle the slow payment problem would allow the Government to stimulate an inclusive recovery without further increasing the taxpayer burden. Giving every small business the option of day one payment is just one instance of how the Government could leverage AI and data to implement genuine change.