Digital Agency

The State of Play with the UK’s Digital Competitiveness

Sam Hannah

March 30, 2023

How digitally competitive is the UK? What steps have been taken in recent years to ensure we can be digitally competitive in future? Are we falling behind other major economies when there seems to be such a great opportunity for our famously strong scientific industries? These are some of the questions that can hopefully be answered in this article, as the economic rut we’re currently stuck in slowly erodes the pockets and patience of the British public.

In order to answer these questions, we must first unpack the meaning of digital competitiveness. According to the International Institute for Management Development, digital competitiveness is defined as the capacity of an economy to adopt and explore digital technologies leading to the transformation in government practices, business models, and society in general.

To further comment on the wonderful spread our partners at Raconteur included in their latest edition, the UK has indeed become less competitive in the digital space. Between 2018 and 2022, the UK has slipped from being 3rd in “future-readiness” to 16th, and from 12th to 25th in the technology factor. These are stark declines in areas the UK has historically been very strong in, so what’s gone wrong?

Of course, it would be easy for many to point the finger solely at the ever-looming spectre of Brexit, as the UK would currently be part of drafting and an eventual beneficiary of the EU’s new Digital Markets Act if that hadn’t happened. However, it did, and this wouldn’t be entirely accurate in any case. In fact, since the Brexit vote there have been a number of economic shocks that the UK has withstood, including the pandemic, soaring cost of living, widespread strikes, and recent political turmoil, all of which have put a dampener on the foreign direct investment flowing into the country. Indeed, as we all know, these issues are being and have been faced by every nation on earth, so it’s not their occurrence in the first place that’s the issue here, rather our lack of preparation through successive governments over the years which has meant that these economic shocks have had such a profound impact on us. This same lack of preparedness has allowed us to blindly walk off a cliff-edge in terms of our digital competitiveness.

One major area where regulatory bodies around the world are tightening things up is in the Big Tech space. The aforementioned new Digital Markets Act from the EU, along with a few noises coming out of the White House and Capitol Hill, suggest that the influence and technical oligopolies created by the likes of Google, Facebook (now Meta), and other tech giants will be severely limited in the near future. Already, the EU has fined Google to the tune of billions of Euros and has ongoing legal disputes with Apple. Luckily, the UK’s Competition and Markets Authority (CMA) is one of the sharpest regulatory bodies in the world, let alone just in Europe, and they recently became the first authority in the world to block an acquisition by a tech giant when they forced Meta to unravel its purchase of Giphy. We have more than enough regulatory firepower to be a world leader in this area, but it’s the stringency of the rules we put in place and the difference in how the UK and other nations or blocs go about implementing their regulations that will determine our success in this area. If the rules and regulations are too strict, this will drive business away from the UK by making it a much less hospitable economy for private enterprise; if they’re too lenient however, these oligopolies will continue, potentially evolving into monopolies down the line, and the squeeze on innovation, consumer choice, and pricing will get even greater.

The UK’s digital skills are also an area of concern. According to a report done by Public First, 42% of businesses are not using digital tools to track orders or inventory, 31% are not yet advertising online, and 38% are not using social media. Almost half (48%) of business leaders had not heard of cloud computing or did not know what the term “cloud computing” meant. This was particularly true of small businesses, who were twice as likely to be unfamiliar with cloud technology compared to large enterprises (48% vs 24%). This points to the need for more digital training throughout our education curricula, more retraining programmes for existing workers already in the labour market, and competitive visa systems that would allow the brightest and best workers from around the world to live and work here. All of this can be achieved through a combination of collaboration with the private sector and direct investment and management from the public sector.

Something that’s been spoken about at length by certain high-profile individuals is the concept of levelling up. Now, despite those who have championed the idea, it’s not at all a bad one, and it’s not new either. The UK has long suffered with a large disparity between London and the rest of the country in terms of living standards, productivity, and many more indicators, and this disparity is about to become crippling. This is both in terms of the UK itself and comparable areas across Europe. The latest OECD report on enhancing productivity in the UK shows us that gross value added (GVA) per worker in the UK’s core cities is just 86% of the national average in 2016. This 14% gap is the largest in terms of domestic productivity amid the larger OECD countries, and the productivity gap between second-tier cities in the UK and elsewhere is even greater. Productivity per worker was 30% higher in Australia and Germany, 26% in the Netherlands, 22% in France and 17% in Italy.

In order to improve upon these rather dire differences between the UK and our closest peers, we must again use a mix of private and public investment and coordination to help businesses in every region take up the latest technologies and spread the benefits thereof. With better digital infrastructure and the education and reeducation programmes mentioned before being implemented around the country, the economic activity can be decentralised and the subsequent competition between regions can be used to spur on industry. British start-ups and existing SMEs in the tech space need much more investment too, and this can be encouraged through a variety of means, from investment banks to pension funds. The long-term growth of the companies which make up the industry is integral to improving the UK’s digital competitiveness worldwide.

All in all, the UK must do a number of things to ensure its place in the world as a scientific and tech powerhouse does not fall inexorably away. In the short term, it must ensure the CMA has the legal framework and continued firepower with which to do its duty, but not make it so cumbersome and overbearing on the industry that it stifles its ability to innovate and doesn’t allow any flexibility. Business agility and adaptive attitudes are two more major factors that are taken into account when measuring a country’s digital competitiveness, so these must be protected and enhanced. The CMA must also act without waiting for the government’s say so, as it has the power and authority to do so. It must act quickly and boldly in order to not fall behind the US and EU in our digital competitiveness. In the longer term, the UK must continue to invest and enrich its wealth of high-calibre educational institutions, continue on the path of comprehensive levelling up and decentralisation in order to grow out and utilise the myriad opportunities across the entirety of the British Isles.

No one said it would be easy, but as long as we listen to the experts — most of whom have been harping on about most, if not all of what’s been mentioned in this article, for decades now — and take advantage of the benefits whilst limiting the drawbacks of both public and private sectors, Britain could truly become a leader in the most changeable and challenging of modern worlds.