A new report shows that nearly as many companies are not planning to invest in digital transformation as those that are.

By doing nothing, firms risk falling behind their competitors.

The digital economy is one of the few growth opportunities for businesses and society. With devices, data and people becoming more interconnected, the potential to increase productivity across industry through digital technology is huge.

However, the problem is that not everyone shares such a positive view. While some are worried about the possible impact on jobs, others are concerned about how to use customer data, cybersecurity risks or simply the cost of digital transformation when budgets are tight.

“What we are seeing is a real polarization between companies who are already digital-ready and those who are nowhere near ready,” says Brother UK’s managing director Phil Jones.

Brother recently commissioned a survey with The Daily Telegraph, Looking at the Tools of Digital Transformation, which found that more than one-third of businesses (36%) plan to invest in technology over the next year with 28pc also investing in upskilling existing talent.

But, more worryingly, nearly the same percentage (31%) do not have any budget next year for either technology or talent.

It is far too often the case that small businesses choose not to commit time and effort to innovation — Mark Tighe, CEO, Catax

So, what is holding some companies back from digital transformation? Inevitably, it seems money may be the heart of the issue, especially for small businesses. The report shows that more than half of all companies (55pc) which said they were not ready for digital transformation blamed a lack of budget, with just under half (47pc) also pointing to a lack of skills and training.

Significantly, the report shows that for smaller businesses, lack of money and time are much more likely to hamper digital transformation, than for larger businesses where company culture and legacy systems are the biggest factors.

“It is far too often the case that small businesses choose not to commit time and effort to innovation,” says Mark Tighe, CEO of research and development tax relief specialists Catax.

He says part of the problem is that many smaller businesses are simply unaware that they may be able to claim tax relief from government for R&D: “Sadly there remains a misconception this only applies to bigger businesses who deal in robots and lab coats.”

For Nicki Sprinz, managing director of digital agency ustwo London, not investing in digital is particularly short-sighted. “Businesses need to understand that digital isn’t just about marketing and social media, it’s about everything your business does – stock control, logistics, managing your people, paying your tax efficiently,” she says. “A business that does these things well is at a tremendous advantage versus the competition.”

In retail there’s often more focus on short-term benefits than on longer-term technology — Matthew Hook, chief strategy officer, Dentsu Aegis Networks, UK and Ireland

Not that lack of digital innovation applies to all small businesses. There may also be differences between industry sectors, according to Matthew Hook, chief strategy officer of media company Dentsu Aegis Networks, UK and Ireland.

For example, whereas IT businesses often understand data protection issues such as cybersecurity and the EU’s new General Data Protection Regulation (GDPR), which comes into effect on 25 May 2018, this often isn’t the case in more traditional sectors.

“We’re a nation of shopkeepers and in retail where margins are very tight there’s often more focus on short-term benefits than on longer-term technology developments,” says Mr. Hook.

Another factor may be that companies are simply holding back because decision-makers in organizations simply do not fully understand the opportunities that digital transformation can bring, and therefore are not offering them to employees.

According to Dentsu Aegis’s latest report, Digital Society Index 2018, the UK rates highly in terms of digital inclusion – particularly in terms of digital training, access to the Internet and widespread use of digital across the economy. However, one quarter of companies (26pc) are not fully utilizing the digital skills of their staff.

Mr. Jones agrees. “The Cs need to be more D,” he says. “In other words, C-suite executives need to be more digital.”

Instead of blocking digital transformation, they need to push the businesses forward by taking ownership of digital. Only by doing this can UK businesses hope to increase their productivity.