Findings: Key Themes from the 2023 Digital Maturity Survey for Wales
The 2023 survey uses a mixed-methods approach, combining insights drawn from desk research, a series of semi-structured interviews with key personnel from the Welsh business community and a first-of-its-kind digital analysis of almost 6,000 Welsh companies.
On this page, you will find an overview of the five key themes that emerged across the three strands of this survey. For summaries and visualisations of data at national and local levels, see the Home page and individual Unitary Authority pages.
Covid-19 was the defining event of the past seven years.
Covering the period from 2016 to 2023, the data captured for this survey spans a time of rapid technological evolution marked by several momentous economic events. Unsurprisingly, the data shows that the Covid-19 pandemic and its aftermath had the largest overall effect on the digital activity of Welsh businesses.
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Fig 1: Digital Maturity at a National Level
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Fig 2: Digital Growth at a National Level
Between 2017 and 2019, overall levels of Digital Maturity across the Welsh economy underwent a slight but noticeable decline. The announcement of nationwide lockdowns in Spring 2020 saw a massive reversal in this trend, as businesses throughout the country sought to stay in touch with their customers (or reach new ones) by upgrading their online presence.
This shift heralded a fundamental transformation in the Welsh economy, with digital technologies taking on a central role in businesses’ long-term commercial strategies. It is noticeable that the period of increased inflation which began in mid-2022 is accompanied by an unprecedented increase in Digital Growth, as businesses adjusted to address this new economic reality.
Many of our interviewees reported adopting new working practices which have persisted past the end of lockdown, whether this meant a shift to hybrid working, part time hours, or the introduction of e-commerce and online service provision. One respondent, the owner of a small craft business, reported that the pandemic had spurred them to transform their entire business model:
“Before the pandemic, my business was about 80% teaching courses to 20% making products. COVID just allowed me to reevaluate everything I was doing. I went to probably 80% making and 20% teaching during lockdown, and now I do about 50/50.”
Different business sectors show marked disparities in Digital Maturity and Innovation
Previous reports on the digital maturity of UK businesses have sought to classify business owners based on their level of digital readiness and skills, with Lloyds Bank’s recent UK Business Digital Index identifying five “segments” from “Passive” to “Advanced”. This survey refines that analysis by demonstrating that varying levels of digital sophistication can also be attributed to different business sectors.
For example, Business Service companies in general have a much higher level of Digital Maturity than Accommodation and Food companies, although both sectors are on an upward trajectory since 2019. When it comes to Innovation, however, Accommodation and Food are second only to Information and Communication Businesses, who have the highest Innovation score for 2023 and the largest gain over the past seven years.
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Fig 3: Digital Maturity by SIC code
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Fig 4: Innovation by SIC code
Transportation and Storage companies registered impressive gains over the same period, albeit from a much lower base. Interestingly, the sector with the lowest increase in Innovation Score since 2016 is Manufacturing, perhaps reflecting the fact that these types of businesses require more time and capital expenditure to implement new strategies.
Whilst businesses have improved their Digital Maturity and Innovation scores across the board, the overall disparities between sectors have remained largely unchanged, demonstrating that the categories represented by SIC codes remain robust even in the context of a widespread digital transformation.
Innovative, digitally-sophisticated businesses can be found all over Wales, not just in major urban centres
The structured sample for the 2023 Digital Maturity Survey for Wales was built to reflect the proportion and distribution of businesses within each unitary authority by type of business (from SIC code), allowing this study to representatively capture the range and activity of businesses to an extent and at a scale not possible in previous surveys.
The widespread digitalisation of even small businesses in the years since the last survey has enabled the application of our digital methods. This has resulted in findings that would be difficult and expensive to achieve using conventional, analogue survey methods. As a result, for example, this survey has identified a whole host of innovative, digitally sophisticated companies operating outside of traditional urban hotspots.
As might be expected, Cardiff has the highest aggregate score across all of our metrics, followed by Swansea and Ceredigion. When we separate out the individual metrics, however, interesting results emerge. Powys ranks highest for Innovation across all unitary authorities, whilst Ceredigion scores highest for Digital Maturity, and Wrexham for ESG. Carmarthenshire, Conwy and The Vale of Glamorgan all rank in the top three for one metric.
The prevalence of digitally adept companies outside of the urban centres of South Wales speaks to a comment by one of our interviewees, who highlighted the importance of extending investment networks across the country:
“There are so many important companies outside of Cardiff, Newport and Swansea that are doing important things, and they’re just not as connected with the investment ecosystem. You could say it’s up to them to connect to those networks, but it’s also up to us to make sure they feel like they can connect.”
In all but one of the past seven years, the aggregate Innovation score for the Welsh economy increased. Whilst this increase was generally quite modest, it does reflect the fact that innovation is being achieved throughout the Welsh economy, including in rural areas.
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Fig 5: National Levels of innovation
Great strides have been made in improving access to digital tech, and this work must be built on in coming years
Over the period covered by this study, the Welsh Government has made a concerted effort to improve access to the benefits of digital technology, both through the rollout of high speed broadband and 4G, and the support offered through the Superfast Business Wales programme. Work to extend coverage to hard to reach areas is still underway, in some cases involving remarkable feats of ingenuity (for example, bouncing satellite signals off the sea to reach remote coastal areas).
The data captured in this study suggest that these efforts have met with considerable success. Notably, both Digital Growth and Digital Maturity levels for rural businesses have continued to grow through the past four years, matching the performance of urban businesses. This accomplishment would have been impossible without the infrastructure investments that have taken place.
Interviewees repeatedly reported that their businesses were now substantially dependent on high speed connectivity, both in commercial zones and in residential areas (to support work-from-home policies). This dependency is only likely to become more pronounced going forward, as more businesses invest in digital technology, and as new technologies which demand higher bandwidth are rolled out.
As a result, digital connectivity is not only vital so that businesses and public services can take their offering online, but also so that their customers and users are able to reach them. The principle of universal digital coverage has never been so vital; moreover, digital literacy and skills for both businesses and the public must be a priority going forward. As one respondent working in public services observed:
“Digital literacy is a big barrier, and making sure that the population are able to interface with these resources… More work is needed to make sure you’ve got that inclusivity, but it is moving in the right direction. But without that sort of digital infrastructure in place, it does make it harder to guarantee that we can provide a service.”
Welsh Values
As well as measuring Digital Maturity, Digital Growth and Innovation, this year’s survey also tested the extent to which the digital presence of Welsh businesses demonstrated use of the Welsh language and expressed values associated with Environment, Social and Corporate Governance frameworks. This is intended to reflect the declared vision of the Welsh Government, laid in the Wellbeing of Future Generations Act (2015) and the Economic Action Plan (2017) aimed at improving the quality of life of all Welsh citizens whilst building a more environmentally sustainable economy.
Overall, use of the Welsh language was very low amongst sampled companies, although rural businesses are twice as likely to use Welsh on their websites than their urban counterparts, with Gwynedd and Anglesey containing 20.14% and 9.72% of all Welsh-using businesses respectively. Different business sectors also demonstrate different levels of Welsh language use, although in this case it is important to be cautious about drawing firm conclusions from a small sample size. Nevertheless, only 1 in 100 websites from the Wholesale and Retail Trade; Repair of Motor Vehicles and Motorcycles SIC used the Welsh language, a far lower number than in the Information and Communication or Businesses and Other Services sectors.
Similarly, the majority of companies sampled in this survey demonstrated few references to ESG in their digital presence. This is not surprising, insofar as the businesses surveyed were exclusively Small and Medium-Sized Enterprises, who tend to lack the resources and the commercial imperative to engage with these concerns. One respondent working for a tech-start-up reflected:
“I don’t know much about how tech companies look towards a net zero future, and I’d love to learn more. There’s a lot to learn, and I don’t know how to learn it. Maybe I haven’t put the time into learning it as I should…I just wish there was a person who could come round to every company and tell us exactly what we needed to do.”
It is very interesting to note that once again we can see clear differences between the different business sectors surveyed and their ESG scores. Companies in the Business and other series sector are much more likely to use material associated with ESG issues than those in the activities associated with food and accommodation sector. There is also evidence that over the period in question, the sample as a whole has increased ESG scores albeit from a very low base. In the coming years, there will be scope for the public sector to drive improvement in this space, both through education and the application of procurement policies which reflect Welsh values.
