Small firms, big gains: the impact of digital adoption on SME productivity in the EU

Last year, we published a report looking at the value of international tech diffusion to the EU economy. In this follow-up report, Digital services and SME productivity in the EU, we examine how technology diffusion plays out at the firm level. It focuses on the productivity benefits for SMEs from adopting digital tools, using survey data and other information about use of three Amazon services: Marketplace; Fulfilment by Amazon (FBA); and Amazon Web Services (AWS).

The findings point to how these digital services help address a persistent source of weakness in Europe’s productivity performance – lagging rates of digital adoption among SMEs. While large firms have invested heavily in automation, data analytics, and cloud computing, 40% of EU SMEs currently have a ‘low’ level of digitalisation, with a further 27% ranking as ‘very low’, according to the Digital Intensity Index.

Smaller firms make up over 99% of all businesses in the EU, accounting for almost two-thirds of employment and over half of economic output. Helping them adopt and integrate digital technologies into their businesses is therefore central to achieving Europe’s competitiveness goals.

Across the three services, the evidence is clear:

• A new survey shows SMEs using FBA achieved an average 18.8% productivity gain in the first year after adoption.
• In the same survey, SMEs using Marketplace reported an average 10.5% productivity gain.
• For AWS, the increase in cloud adoption between 2014 and 2023 implies a 14.5% cumulative productivity gain for SMEs over that period.

Survey responses and broader studies show how these gains arise in different ways:

• Marketplace helps SMEs reach millions of new customers across the EU and globally, expanding their sales with little need for increased staff time – raising staff productivity and improving returns on existing assets. In the survey, SMEs report a 9.0% average rise in sales in the first year after adoption, but only a 1.4% average rise in staff time spent on those sales.
• FBA improves efficiency by outsourcing logistics and fulfilment, freeing firms to focus on growth – raising sales and reducing costs per sale, boosting productivity via both top line and margins. SMEs report an 8.2% average rise in sales, but a 3.1% average fall in staff time spent on those sales.
• AWS allows SMEs to access scalable digital infrastructure without heavy upfront investment – levelling the playing field between small firms and larger competitors, raising productivity.

Together, productivity gains for SMEs from these three Amazon services translate to around €10–20bn a year in additional gross value added to the EU economy.

Figure 1: The measurable productivity impact of digital services adoption

Aligning policy with productivity

The Draghi report identifies SME scale-up and technology adoption as two of the most critical levers for raising Europe’s long-term productivity. The evidence from our SME productivity study reinforces that view: when SMEs adopt digital tools, output rises faster than labour input – the hallmark of real productivity improvement.

But adoption does not happen automatically. Many SMEs face barriers such as lack of digital skills, limited access to finance, and uncertainty about returns. These constraints underline the importance of complementary investment in training, infrastructure, and organisational change, alongside the right incentives for digital adoption.

Accelerating SME adoption of productivity-enhancing technologies can materially strengthen Europe’s economic competitiveness – helping to close global productivity gaps, reinforce competitiveness, and deliver more inclusive growth.

It will also depend on progress in strengthening the EU’s Single Market – the foundation for technology diffusion and scale, and an issue explored in our December 2024 report Single Market fragmentation: potential gains from greater integration.

This blog was written by Surjinder Johal (Director) and Andy King (Specialist Partner).  

Both authors joined Flint Global from the UK’s Office for Budget Responsibility (OBR), bringing deep expertise in economic analysis and public finances. Surjinder draws on his two decades of experience at the OBR and HMRC to advise clients through robust economic modelling and fiscal analysis. Andy leads Flint’s economic modelling and analysis, following a decade as a senior leader at the OBR, preceded by several senior roles within HM Treasury.