December 31st 2020 didn’t just symbolize the end of a tumultuous year that few could have forecast, it marked the end of the UK’s transition period for departing the European Union (EU). This historic date symbolized the end of nearly half a century of Britain’s membership in the EU.
While this means that Britain has left the EU single market, the EU – UK trade agreement, signed in late December, maintains trade of goods between the two territories with no tariffs or quotas. On the other hand, cross-border provision of services, such as financial or professional services, remains less certain as there will no longer be automatic recognition of professional qualifications or licenses.
Despite these uncertainties, there are several reasons to be optimistic about digital transformation and technology investment here. According to a study by London and Partners, London tech firms raised $10.5bn in venture capital funding in 2020, higher than any other city in Europe. The city also has the highest number of unicorns and future unicorns, and is set to benefit from further growth in areas such as fintech, enterprise tech and health tech.
Digital transformation trends in the UK
The UK is one of the world’s top ten global economies and the third largest in Europe after Germany and France. Services, particularly banking, insurance and business services, are key drivers of growth, accounting for nearly 80 percent of its economy. London is the second-largest financial centre in the world and is one of the three command centres of the global economy (along with New York and Tokyo).
According to the Global Interconnection Index (GXI) Volume 4, interconnection bandwidth in Europe will grow at a 45 percent compound annual growth rate (CAGR) from 2019 to 2023. At that time, London alone is expected to account for 35 percent, or 1,337 Terabits per second (Tbps) of Europe’s total interconnection bandwidth (3,782 Tbps). This is three times higher than Paris and more than twice that of Amsterdam, attesting to the vital role that London will continue to play as a strategic business hub.
That being the case, it should come as little surprise that the UK is also a core hub for global enterprises looking for a strategic location, to interconnect their digital businesses to dense ecosystems of networks, customers, and partners. Some of the major trends driving digital transformation in the UK include:
- Networks and 5G:
The UK is one of the most technologically advanced, and one of the largest, mobile and telecom markets in Europe. The rollout of 5G has already begun, and it plans to complete the switch to fiber-optic broadband by 2033. In fact, last year the UK pledged £250 million (approx. $340 million) to diversify the 5G supply chain. Many believe that these factors will be a key driver in the UK’s competitiveness and economic recovery from Covid-19.
- Covid-19 cloud adoption:
Organizations in the UK were already rapidly shifting to cloud services to help them automate business processes. When the pandemic accelerated the shift to remote working, companies suddenly needed to enable tens of thousands of employees to work from home. This not only bolstered investment in communications and cloud technologies, it also increased the need for bandwidth to help enterprises scale, and security solutions to protect data and networks.
- Artificial intelligence (AI):
The UK has been a pioneer in AI progress since its inception. Last year, investment in the field surpassed $1.4bn, placing it third globally behind only the U.S. and China. AI will continue to be a source of new technology investment as companies look for ways to gain a competitive edge and reach sustainability goals.
- Regulatory environment:
Brexit has businesses concerned about regulatory change. Many are investing to ensure they can make a seamless transition to being a non-EU organization, including compliance with the General Data Protection Regulation (GDPR). Open banking laws in the UK already require banks to open APIs to third-party developers, making the region one of the fastest growing for FinTechs. Any further deregulation will likely fuel additional growth in digital services such as banking as a service.
Changing with the times
These trends are driving significant change across the UK and compelling organizations to rapidly adapt their digital infrastructure. This is particularly the case in in the largest cities – London and Manchester. But adapting to the rapidly changing digital landscape requires agility, speed and partnering for innovation. By colocating inside data centres at the digital edge, businesses can instantly interconnect with their supply chain partners, as well as connect their own infrastructure and services for more flexible architectures that are tailored to their immediate needs. This will become increasingly important as tech investment in the UK continues to grow, and businesses look to scale up their services to drive innovation and expand their reach.