Flint advises international businesses and investors on policy, politics, regulation and competition.
Flint advises international businesses and investors on policy, politics, regulation and competition.
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Flint sees a pivotal moment for the tech sector and its investors to shape the UK policy and regulatory environment, enabling technology innovation and economic progress with the support of a government that is prioritising growth.
The political and regulatory risks and opportunities for investors in tech and tech-enabled services have increased markedly in recent years. Security, safety and competitiveness concerns (often in tension) continue to drive both tighter regulations and further divergence between the regulatory approach of the US, EU, China, the UK, and other countries.
This has created a fragmented and unpredictable investment environment across all aspects of tech policy – from digital infrastructure to cybersecurity, data sharing, and online harm – between countries.
For investors in the UK, there are important tech and digital policy and regulatory trends in 2025 they should factor into their investment strategy:
For a deeper dive into how UK grid reform, planning changes and resilience regulation are reshaping the outlook for data centre investors, read our analysis here
How the UK policy environment will evolve over the next few years is a crucial consideration for investors, especially for those looking at the implications of different policy and regulatory environments for new investments, bolt-ons, or new markets to enter.
Figure: Timeline of recent UK legislation on tech and digital regulation
The UK government is shifting its regulatory approach to better support growth coming from technology innovation and adoption. This will likely result in a tech regulatory environment that strikes a balance between the approaches taken by the EU and US.
To understand how EU consumer-facing digital regulation is likely to evolve and what divergence could mean for UK-based firms - see our take on the upcoming Digital Fairness Act
In recent years, the UK has introduced new regulatory frameworks for technology companies and those using digital services, including a new digital competition regime, online safety regulations, and updated cyber security and data protection laws. While in most cases these frameworks are intended to be less onerous than their European equivalent, they have nonetheless introduced new burdens and constraints to the market.
The broader political backdrop has led to a course correction on regulation, with the UK’s Labour government prioritising growth above almost all other goals, e.g.:
The current exception to the UK’s more growth-focused regulatory approach is online safety, where political priorities still favour more stringent measures for now. This creates its own opportunity for investment in technical solutions designed to meet new regulatory obligations on issues, such as age assurance and online content moderation.
At the same time, the UK is seeking to consolidate its relationship with a Trump-led US administration. A Labour government in the UK is a less natural ally to Trump, yet the US remains a critical economic and security partner. The government knows it must demonstrate alignment with US priorities and ways of thinking, or else risk a deterioration in its relationship in key areas like trade and defence spending. One potential area of strategic alignment is tech regulation: the UK’s tech and digital services market is home to many US companies and plays a hugely significant role in their global growth strategy.
While the UK is unlikely to significantly roll back recently introduced legislation in the short-term, it has paused plans to legislate on AI Safety Regulations to ensure its approach is calibrated to new US thinking.
There will also be a desire to avoid other potential flashpoints with the US that could be prompted by overzealous enforcement of existing regulations, e.g. in sensitive areas like anti-trust investigations. However, this could become difficult to manage if strong political or public reaction emerges in response to perceived harms caused by technology, such as the use of new AI models for fraud or child sexual abuse.
While much of the debate in this space centres on the largest tech companies, a softer approach to regulating tech and digital services in the UK creates improved commercial conditions, lower barriers to entry, and reduced risk for all players in the market.
There is also the opportunity to engage policy-makers, to make the case to remove specific regulatory barriers that hinder growth, creating a more innovation-friendly operating environment.
Figure: Shortfall in UK public sector digital spend against peer benchmarks
There is potential for increased commercial opportunities in the public sector from 2025 to 2030 for B2G digital companies — particularly those that can improve data management, deliver AI and automated productivity gains, and improve user experience.
The government has committed to improving the quality, productivity, and efficiency of the UK’s public services. Increased digitisation and the adoption of new AI and automation tools are seen as critical enablers of these goals.
The government has signalled its ambitions on public sector digital transformation, establishing a new ‘Digital Centre’ function within the Department for Science, Innovation and Technology to drive this agenda. A small group of Cabinet ministers has been set up to provide political impetus – importantly, this includes Darren Jones, who, as Chief Secretary for the Treasury, will need to find the money and sign off on increased investment.
A recent review of the state of “digital government” has highlighted both the scale of the challenge and potential with increased investment. Almost half of government services are non-digital, while fragmented data architecture and outdated legacy systems hinder progress in automation, AI adoption, data analytics, and data-driven decision-making. Furthermore, public dissatisfaction with the current state of digital services adds pressure on the government for rapid improvement and investment.
The public sector would need to increase digital spend by more than £5bn annually to catch up with comparator public sector organisations. Finding new money at the next Spending Review (in the summer) will be challenging. However, at least some increase in spend within this envelope, is not large, relatively against other budgets. Departments could also be incentivised to find funding through cuts to other budget lines by allowing them to retain any savings generated by digital transformation. While there is a desire to reduce spending and reliance on external service providers, the public sector currently lacks the in-house capability to deliver on the current or required level of digital transformation.
This creates a sizeable opportunity for B2G service providers whose offers align with the government’s priorities for digital transformation, including more integrated digital and data infrastructure, increased productivity and long-term cost savings, and enhanced citizen experience.
The government’s emerging intention to invest more in '-as-a-service’ digital products also offers greater potential for resilient spend. This may require a shift in commercial strategy for B2G digital suppliers to align with new procurement strategies.
Figure: Global growth in demand for data centre capacity
Planning and energy availability barriers to digital infrastructure build-out should reduce in the UK over the next five years. However, this action may have come too late to prevent other markets from gaining momentum in the AI infrastructure race.
The UK government has recognised that vastly increased investment in “digital infrastructure” is critical to improving growth prospects and ensuring the UK remains globally, economically competitive in high-growth areas like the development and adoption of Artificial Intelligence. Data centre capacity build-out has been identified as a strategic priority, with political sponsorship from the PM and the Chancellor. The UK’s positioning comes at a time when global demand for data centre capacity is rapidly increasing.
Government action is already in train to make it easier for data centre developers to obtain planning permission. Local authorities will be directed to incorporate land allocation for data centres into their plans for local development. The government is creating a new right to intervene and overrule refused planning permission for data centres – and has in fact already exercised more general powers to overturn several past refusals.
At the same time, the National Energy System Operation is delivering reforms to speed up energy grid connections. The grid connection queue had left new data centre developments in the UK facing connection wait times of more than a decade. The reforms should reduce this wait to a few years.
However, outside of proposed AI growth zones, there will still be no prioritisation of grid connections for strategic demand projects that support growth, like data centres. Energy costs in the UK also remain high compared to global peers. Some in the sector believe action on barriers has come too late to prevent Germany over-taking the UK as the top data centre market in Europe—at least temporarily.
The UK’s action will create a more enabling commercial environment for data centre investment, at a time when other European and global markets, such as the Netherlands and Japan, still face significant policy and regulatory barriers to data centre development.
These reforms will reduce the risk associated with data centre investment strategies in the UK and investors can expect government support in realising investment deemed critical to the UK’s economic future.
Figure: The Global Innovation Index: The top 15 innovators, 2020–2024
The UK government is willing to intervene to stimulate domestic economic activity in fields like semiconductors, AI, and biotech and is likely to remain less protectionist than the EU and US, even in relation to investment from China.
The UK government views its future global competitiveness, as well as national and economic security, as dependent on developing a sovereign capability in high-potential technology fields like Artificial Intelligence, semiconductors and biotech.
Previous ambitions to become “world-leading” in these fields have been sensibly tempered. There is a new political acknowledgement that the UK is a middle-tier global economy that will continue to rely on foreign investment and international capability. This has resulted in an understanding of the need to create a globally attractive investment environment, in order for the UK to continue punching above its weight in tech innovation.
The UK government will be keen to pull the levers it has available to stimulate growth in the technology sectors deemed critical to the country’s progress and future. Against a tight fiscal backdrop, this is likely to involve less direct state investment than previously planned, in areas such as sovereign compute capability—i.e. the availability of compute capacity to serve UK science, economic, and public service purposes.
As such, the UK government will be increasingly willing to explore other policy tools, including more innovation-friendly regulatory environments, a more liberal approach to visa rules for global talent, and a willingness to provide fiscal incentives for significant new investments.
Political recognition of the UK’s global economic position reduces the incentive to deploy protectionist measures aimed at boosting domestic capability in areas like trade and foreign direct investment, putting the UK on a separate path to the US and the EU, both of which are increasingly adopting protectionist strategies to safeguard strategic industries. However, national and economic security concerns will still drive a ‘high-walls, small garden’ approach toward foreign investment in certain sensitive areas, even as the UK seeks to improve its economic relationship with countries such as China.
Ultimately, the UK will try to insulate itself from competition between global ‘great powers’ on sovereign tech capability. While the UK is not currently top of Trump’s tariff list, the potential remains for the US to initiate a trade war, which could spill over into the technology sector in areas like digital services taxes. The Trump administration could also request that the UK apply new restrictions on trade with China – which could spark countermeasures.
For investors, the UK could present a safer environment for investment in high-potential technology sectors. While challenges remain in the UK market—such as limited access to capital and an increasing tax burden—the policy and regulatory risks in critical technology sectors are likely to carry less downside risk, absent a geopolitical shift.
There is also the opportunity for investors to leverage their investment plans in sectors with high growth potential to advocate for government support and policy change. By aligning with government’s priorities of digital transformation, productivity gains, and innovation, investors can strengthen their position to secure incentives, regulatory flexibility, and access to public sector partnerships.
This blog was written by James Snook, Martin Summers, and Harriet Hamblin, who lead our work with tech investors and investors in digital and tech-enabled services. To speak with our experts, contact us here.