Technology, telecoms and outsourcing

October 2023

• Digital tech currently contributes around £150 billion to the UK economy (around £400 million every day) and makes up 7.7% of the entire UK economy. An average salary in this sector in the UK is around £53,500 (the average UK salary is just under £30,000). There have been concerns about a North-South divide since London attracts a large amount of talent, leaving companies in Manchester and Leeds in need of employees. Glasgow, Newcastle, Leeds and Oxford have seen tech ‘surges’ since the pandemic.  

• In 2022, Manchester reclaimed itself as the leading regional tech hub in the UK after London, having raised £532 million in funding. Edinburgh continues to offer the highest salaries outside of London around £58k, followed by Reading and Manchester.  

• Tech was one of the few sectors to continue to see rising investment throughout the Covid-19 pandemic. Between 23 March 2020 and 27 April 2020, the level of investment in UK tech startups increased by 34% compared to the same period in 2019. 

• UK-based tech companies raised £24 billion in private capital in 2022 - a downturn in comparison to 2021, because of a drop in the second part of the year, though it remained the highest of any European country. Yet according to Atomico, at the time of writing, tech has raised £5.9 billion - the quickest decline across Europe at 57%, with decline being a global trend. Concerns for companies about UK regulation and global conditions such as inflation and macroeconomic uncertainty have been provided as explanations as to why.  

• The UK Digital Strategy, which involves rolling out new tech infrastructure and increasing R&D investment from £15 billion to £20 billion a year, aims to increase the annual Gross Value Added by the UK tech sector by £41.5 billion by 2025 and create almost 680,000 extra jobs in the sector.   

• In response to concerns over privacy, the EU created the General Data Protection Regulation (GDPR), which came into force in May 2018, and was incorporated in UK law post-Brexit in 2020. It places much more onerous restrictions on organisations that process data, requiring that records be kept of all personal data, that organisations gain and be able to prove active consent before collecting data, as well as being able to show what it's used for, who it goes to, and the protections in place to ensure it does not fall into unintended hands. Non-compliance can mean a maximum fine of €20 million or 4% of a company's global turnover if it’s higher.  

• The first month of GDPR saw a sharp rise in the number of complaints to regulators across Europe, signifying public interest in the new regulations. So far in the first half of this year, fines have totaled €1.5 in comparison to the €4 billion issued since the regulations were introduced in 2018. Just €1.2 billion issued in May alone. In September 2022, the record breaking fine of €405 million was issued to Instagram by the Irish Data Protection Commission, the second largest GDPR fine for violating children’s privacy following the publication of email addresses and phone numbers.

• In December 2022, Facebook’s parent company Meta agreed to pay $725 million in settlement over the Cambridge Analytica scandal, following a data breach affecting as many as 87 users. This settlement is the largest recovery ever achieved in an American data privacy class action, and the most Facebook has ever paid to resolve a private class action. In 2019, Facebook was fined £5 billion, in the largest ever fine imposed by the U.S regulator, also over Cambridge Analytica.  

• In 2021, the Digital Markets Unit (DMU) under the Competition and Markets Authority was introduced to keep a strict eye on large digital platforms that have a big influence on the market. The body targets “firms with substantial and entrenched market power,” labelling them as companies with “Strategic Market Status.” Those with Strategic Market Status will need to follow conduct requirements laid out by the DMU. Enforcement powers include imposing a fine of up to 10% of the company’s global turnover, and civil penalties to senior managers. Those with Strategic Market Status will also need to report merger transactions to the CMA before completion. 

• In April this year, the Digital Markets, Competition and Consumers Bill (DMCC) was introduced to Parliament and is expected to come into force in mid-2024. It will provide the Digital Markets Unit with statutory powers to clamp down on unfair practices. For companies with Strategic Market Status, it will prevent the use of their size and power to limited digital innovation or market access. This is intended to promote further investment in the UK’s tech industry.  
• The proposed Online Safety Bill seeks to protect children and adults online, and place greater responsibility on platform providers. The ‘triple shield’ will mean all illegal content will be removed, including content against the provider’s terms and conditions. Adults will be able to tailor their own content, but children will automatically be prevented from seeing certain content without changing settings. Moreover, it seeks to tackle repeat offenders, with Ofcom as the regulator. All companies, including international ones, will have to comply with this bill or be subject to enforcement by Ofcom.  
• Companies such as Apple and WhatsApp have spoken out against the Online Safety Bill claiming it would weaken the end-to-end encryption their services offer, as the proposed bill would grant Ofcom the power to use accredited technology to scan messages for content. Currently, the bill is being debated in Parliament.