British businesses are calling on the government to lead a digital recovery from the economic crisis sparked by the Covid-19 pandemic.

A survey conducted by cloud business management solutions provider Sage found that 80% of small and medium-sized enterprises (SMEs) believe digital adoption will be crucial for recovery and job creation.

However, just a third of those say they have the bandwidth to invest in the technology required. Forty per cent said government grants would enable them to increase hiring in digital roles.

The findings also show that nearly two-thirds of SMEs have made or are planning to make redundancies as a result of the Covid-19 pandemic, which Sage says equates to 1.4 million jobs if the government fails to take decisive action now.

Despite the stark warning, the report shows that British SMEs are confident about the future, making bold moves to improve processes and productivity, access new markets and improve their relationships with customers. Three quarters expect to be profitable by June 2021, while nearly half (47%) are taking measures to increase export revenues.

Sabby Gill, managing director of Sage UK and Ireland, said: “In the words of one of our customers, the insights in this report are a ‘gut wrenching’ read. Behind the stark statistics lie thousands of individual stories of people whose livelihoods and passions are under threat. Businesses have had to radically change their plans and strategies, adapting to unprecedented ways of working. But this has created the potential to drive up productivity, especially where processes have been digitised.

“We have some tough months ahead with many unknowns so if we can help businesses access finance and technology and reduce exposure to risk, we will see new jobs emerging."

Reacting to the report, Tony Danker, chief executive of Be the Business, said: "For me, the most important takeaway from this report is that while UK SMEs are optimistic for the future, this is a precarious recovery. Most say they will be making a profit by the end of the year. However, there is a caveat to this optimistic outlook, and this is where I believe policymakers and business support networks must focus their attention.

"SMEs are not well prepared for a second wave of the pandemic, or any other significant external shock. I believe the answer to the question of how we should protect this fragile recovery is found within those SMEs that are thinking about tech adoption but have not yet acted."