60% of small businesses may be using cloud computing services, yet 40% are put off by security fears.
Data theft or loss is the biggest concern for companies that have not yet taken up cloud computing services, according to research by the Federation of Small Businesses.
Their concerns included data theft or loss, reliable access to online services, concerns who would have access to data and liability issues.
The Federation of Small Businesses said using cloud computing could help 80% of organisations reduce their costs by 10-20%.
National chairman at FSB John Allan said: "Many small businesses are recognising the advantages of cloud computing services, but there remains a great deal of concern that sensitive data may not be secure or the service not reliable.
"Businesses don't want to transition to cloud-based systems without knowing who will be liable if something goes wrong.
"Clearly, there is more for the industry and regulators to do to reassure businesses that their data is safe and secure. But equally apparent is the message from small businesses that pricing and terms and conditions need to be much more transparent."
The survey revealed that 45% of small businesses are already greatly or fairly reliant on cloud computing services.
The most common services were storing files online, web-based email and calendars, file sharing services, web-based office software and accounting and invoicing services.
Allan added: "The fact that so many businesses are already heavily reliant on web-based services raises some pointed questions over the resilience of the wider UK economy if we can't find answers to questions like global data security and legal jurisdiction over data held in other countries."
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