While Silicon Valley, Beijing and Shanghai continue to receive the plaudits for their tech credentials, there’s an emerging tech powerhouse that nobody’s mentioning yet: the UK.
Silicon Valley, Tokyo and New York have dominated the global tech industry for the last two decades. After all, most of the biggest companies in the world – Apple, Google, Softbank, etc. – are in places like this. However, the UK is fast emerging as a tech hub in its own right.
In numbers: The UK tech scene.
The United Kingdom’s IT sector reached an impressive valuation of £764bn – or one trillion dollars – during 2022 London Tech Week. That figure puts the UK up amongst the world’s biggest players. According to Tech Nation, “the UK is fourth in the world for tech investment at $40.8bn, having achieved a record year in 2021 and an increase of nearly 20x since 2011 in venture capital funding.”
Across the UK, twelve of every one hundred available jobs are in technology roles. And according to the UK government, over half of those positions were available outside of London and the South East, which shows a decentralisation of the UK’s tech industry. To appreciate these figures, comparing the UK’s tech industry today with how it was in recent decades is vital. Just ten years ago, the UK tech ecosystem was valued at just £44bn. Since then, it has grown an eyewatering seventeen times as big in value. Even more impressively, the UK’s scaleup ecosystem is now valued fifty times higher than it was just a decade ago. The United Kingdom’s deep tech investment has undergone a significant transformation, too; thirty-three times more investment in 2022 than in 2011.
According to Tech Nation, the UK’s FinTech sector is the most significant scaleup sector, contributing to nearly half of the industry and a third of the total investment in 2021. Compared with 2011, when there were 2.2 million people in the UK working in tech startups and scaleups, that has more than doubled to just under 5 million in 2022.
So, what has changed in the UK in the last decade to aid this fledgling industry? Enter Brexit…
Brexit’s role in the UK’s tech sector growth.
Cast your mind back to watching TV back on 24 June 2016. UK Prime Minister David Cameron made a statement in Downing Street confirming a majority in the Brexit referendum voted to leave the European Union. At that moment, nobody could have foreseen the implications of Brexit for the UK’s tech sector. In the first seven months after it went into effect, the conditions of the EU-UK trade agreement produced a 14% decline in UK exports to the EU and a nearly 24% decline in trade in the other direction. This takes the total impact on the UK economy to a projected £44 billion, with £11 billion in lost exports to the EU and £32.5 billion in lost potential imports to the UK for 2021. This left the UK looking for opportunity elsewhere to make up the lost trade.
While every other EU member is bound to the same EU technology legislation, the UK, is now positioned within the continent to offer a fresh approach. Now, it aims to define its own path and pave the way for innovation and new international partnerships. That won’t be easy, though, with the UK having to navigate and negotiate alone between global trading giants like the US and EU. With control over how to spend its budget, the UK controls the investments in innovation, a distinct advantage it enjoys over EU member states.
Another advantage the UK tech industry enjoys over its close neighbours is its ability to be agile and move quickly to regulate new digital markets and AI. And the trajectory of post-Brexit regulation for the digital economy is encouraging. After all, the UK’s 27 closest neighbours are all imposing the EU’s strict digital regulations. That means the UK’s ability to be flexible, adapt to new technologies, and encourage innovation and economic expansion are exceptionally beneficial.
Is the UK Government focused on growing the tech industry in the UK?
The importance of the tech scene to the UK was in full view during 2022 London Tech Week. Indeed, the UK Government used the event to launch its UK Digital Strategy officially. Senior cabinet minister and Chancellor of the Exchequer Rishi Sunak and London Mayor Sadiq Khan were both present and promoting it. This unequivocally shows the growing importance of the tech scene to the UK Government.
The ambitious digital strategy brings together a variety of existing initiatives as well as some fresh ones. And it comes fresh on the heels of the UK’s recent successful deals with Japan, Australia and a soon-to-be agreement with New Zealand. The ultimate aim of the strategy is to make the UK the best place in the world to start and grow a technology business.
Chris Philp, minister for tech and the digital economy at the Department for Digital, Culture, Media and Sport (DCMS), explains the importance of the strategy to the UK Government:
“The UK’s economic future, jobs, wage levels, prosperity, national security, cost of living, productivity, ability to compete globally and our geopolitical standing in the world are all reliant on continued and growing success in digital technology.”
The UK – Singapore deal: a boon for the UK’s tech industry.
After severing ties with its 27 EU neighbours, the UK has, unsurprisingly, been working ferociously behind the scenes to create a new tech strategy.
The first part of that tech strategy has come to fruition, with a new digital trade deal between the UK and Singapore paving the way. According to the UK Government, this digital trade deal will “cut costs, slash red tape and pave the way for a new era of modern trade.” The UK’s trade deal with Singapore was described as “the world’s most comprehensive digital trade deal”.
Impressively, it’s the first deal of its kind struck by any European nation and is undoubtedly the world’s most comprehensive digital trade agreement. The deal establishes exciting new tech relationships between the UK and Singapore. Those relationships span FinTech, LawTech as well as data innovation.
So, what does the deal mean for businesses in the UK? It means UK companies will benefit from improved data flows, consumer and business safeguards and digital trading systems.
Unlocking the tech opportunities of the future.
Will these strategic moves by the UK Government continue to reap the rewards? Time will tell, but Singapore can be seen as a gateway to the broader Indo-Pacific region. Interest now turns to the UK’s bid to join Singapore and ten other nations in the Trans-Pacific Partnership (CPTPP). A successful membership bid to the CPTPP would mean the UK would have access to an £8.4 trillion free trade area that would provide vast opportunities for UK business.
What’s potentially lucrative in tech in the coming years?
Cryptocurrency, the Metaverse, Artificial Intelligence (AI), and Machine Learning are already making waves. And those four are set for serious growth over the next ten years. So, the question is, is digital trade the key to unlocking future opportunities? The UK Government officials certainly seem to think so.
Secretary of State for International Trade, Anne-Marie Trevelyan MP, explains,
“Digital trade presents huge opportunities for our brilliant UK businesses, that’s why we’re building a global network of next-generation trade deals that drive productivity and boost high-paying jobs and growth in all parts of the UK. By addressing digital protectionism on the global stage and championing a free, open, and competitive digital economy, more UK companies will be able to export their innovative, high-quality services and goods globally.”
Could the UK become a global leader in digital trade?
Undoubtedly, the UK’s ambitious independent digital strategy means it could potentially become a global leader in digital trade. Firstly, the digital commerce clauses in the free trade agreements with Australia and Japan go considerably beyond EU precedent. Secondly, the UK has led the approval of a set of G7 Digital Commerce Principles, which outline how G7 nations have agreed to handle digital trade. Initiatives like this could – in theory anyway – provide solid foundations for future cooperation and consensus-building and impact world discourse on a broader scale. The UK’s broader ambitions speak about enshrining freedom and openness in promoting global digital trade.
In the Digital Strategy, they explain what this entails:
“We will work across Government…to promote digital exports, and seek to ensure that new free trade agreements have a digital chapter (including zero-tariff digital trade, cross-border data flows with trust, and IP and source code protection).”
And the UK isn’t resting on its laurels, promising a “cross-Government effort to promote inward investment into UK tech and UK VC funds by focusing on key target geographies, such as the Middle East, the Asia-Pacific region and North America.”
In my opinion, the UK is an emerging tech powerhouse worth keeping an eye on. A perfect storm of Brexit and a global pandemic has accelerated the UK Government’s ambitious digital plans. As we’ve noted, the UK’s tech ecosystem has grown a massive seventeen times in value in just ten years. With their rubber-stamped Singapore deal and other deals like New Zealand coming close to being sealed, the future for the UK’s fledgling tech industry looks set to continue its growth. The UK enjoys a distinct advantage in that it can be agile and react quickly, exploiting opportunities before other countries have even had a chance.
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