Business technology providers including Sage, Shopify and Zoom have written to Chancellor Jeremy Hunt calling for increased tax breaks for spending on digital services.

The companies say that implementing tax breaks for digital services would “empower” small and medium-sized enterprises and help them to leverage artificial intelligence to improve overall productivity – a key Government concern.

Without action, warns the letter, Britain’s global competitiveness will be harmed along with any aspirations to become a science and technology superpower.

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“Falling behind on digital adoption also means falling behind on the coming wave of AI deployment across the economy,” said the letter, seen by the Financial Times, which was sent to Mr Hunt on Friday.

“Unless we can correct this, economic growth, competitiveness, and the ability to become a science and technology superpower is at risk,” it added.

Small businesses should be allowed to claim up to 140 per cent on the first £50,000 they spend on “productivity enhancing” digital services, along with an extra 40 per cent deduction against a business’s corporation tax bill, compared to how they can write off business expenses right now.

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Support could take the form of a scheme similar to Australia’s small business technology investment boost, which offers companies with an annual turnover of less than A$50 million (£26 million) an additional 20 per cent deduction on technology expenditure.

According to Sage, small businesses unlocking the full benefits of technology could add an extra £232 billion of value to the UK economy, almost doubling the value of tech use to £448 billion annually.

However, the most significant barrier to tech adoption for small businesses is cost, according to Sage, with 41 per cent of SMEs concerned about adopting new tech due to cash flow pressure.

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