By Daniel Hunter

UK small businesses are stuck in growth and profits ‘limbo’ due to a shortfall in IT skills, according to new research by Simply Business, the UK’s largest business insurance provider.

The 2012 techSME index, which questioned over 4,000 small businesses (with up to ten employees), reveals that one-in-five lack basic IT skills and 40 per cent of those identify this as a key factor hindering their growth.

Those affected by skills shortages have also seen their profits hit, with the findings showing they are most likely to record no annual profit (17.5 per cent), in contrast to tech-savvy businesses, which recorded the highest overall returns.

One crucial area where small businesses are losing out is in harnessing the power of the Internet. Nearly half of small business owners admit they do not have a website (47 per cent) and over a third avoid using email (35 per cent), suggesting that many still rely solely on word-of-mouth to communicate with customers.

However, the level of IT-phobia varies between businesses, with more established companies in danger of being eclipsed by younger start-ups. Almost half (43 per cent) of businesses over ten years old reported a lack of IT knowledge, compared to only eight per cent of those operating for less than two years, suggesting business owners get ‘stuck in a rut’ and fail to keep up with the latest trends.

In addition, younger businesses are by far the most active on social media, with nearly half (45 per cent) of those operating for up to two years using social tools, compared to just a third (29 per cent) of those in business for over five years.

The research also revealed that IT spend is low on the agenda for the majority of small businesses with one-in-ten (11%) admitting they haven’t invested anything in IT in the last year and even more (17 per cent) anticipating zero spend in the coming year.

“Our findings show that IT is no longer an optional extra for small businesses. Companies of all sizes should be taking advantage of the technologies at their fingertips, or they will be quickly left behind in a competitive marketplace," Jason Stockwood, CEO of Simply Business, said.

"Whether it is simply to help manage admin, reach more customers or develop innovative new products, IT is a key enabler for staying ahead of the competition.

“SMEs are frequently seen as one indistinct group, with the major focus on either young start-ups or larger businesses offering significant employment. Our concern is that those in between the two are getting stuck in ‘limbo’, partly due to a failure to embrace new IT tools and innovation. At a time when the economy is desperate for growth, it is crucial to support these businesses, giving them the skills to take the next step on their business journey.”