Barriers to adopting new technologies threaten the recovery for SMEs, especially in hard-hit rural areas, according to new research conducted by University of Limerick economist Stephen Kinsella.

The study found that nearly three in five small businesses have a willingness to invest in digitisation but face several hurdles including high cost, low trust in suppliers and a lack of in-house capabilities to implement digital strategies. As a result, just 19pc of smaller Irish firms are ‘highly digitalised’, while just 24pc of larger firms are.

The report found that although technology has helped many businesses adapt throughout the pandemic, many SMEs are now recognising the need to make significant changes to their digital infrastructure, but lack the capacity to make them.

The research chimes with similar findings from Bank of Ireland’s monthly Economic Pulse survey. Bank of Ireland found firms identified infrastructure as a headwind for the recovery, with telecommunications topping the list for areas needing investment, given demand for e-commerce and increased remote working. The survey found 36pc of firms believed telecoms in their region required further investment – twice the figure in pre-Covid surveys.

Overall, the survey found economic sentiment has improved over the last month as businesses and households have begun to look past the current lockdown towards a future recovery.

Meanwhile, businesses were downbeat about the current economic situation under lockdown and post-Brexit disruption, but most were expecting an improvement in activity and hiring as the year progressed.

“Both consumer and business sentiment were up on the month as households and firms looked towards the economic recovery now that the vaccine roll-out is under way,” said Loretta O’Sullivan, Bank of Ireland chief economist. “Of course, it will be a while before we get back to ‘normality’ and it may be that some of the pandemic-induced changes to the way we live, work and shop persist, with longer lasting implications for the economy.”

Irish Independent (edited version), 22 February 2021