Spotlight UK: An uncertain future in the digital race

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5 min read

In the Digital Economy and Society Index from 2020, the United Kingdom ranked 8th overall which already marked a loss compared to previous years. But not necessarily because the UK did not develop its digital score - other countries were simply faster in their transformation.


  1. The Strengths
  2. The Weaknesses
  3. Summary

The Digital Economy and Society Index (DESI) is an annual report covering the digital status quo of EU countries. Due to Brexit, the available report is from 2019/2020, so please be aware that since then, quite a few things might have changed. Unfortunately, it was hard to find any current (and most importantly representative) overall numbers outside of the DESI report.

The Strengths: A strong infrastructure & digital know-how

The United Kingdom has an incredibly high take-up of fixed broadband (94% vs. 78% EU-wide) and also for mobile broadband. Additionally, it's slightly ahead of the curve when it comes to 5G readiness and has made huge steps from 2019 to 2020 (0% to 23%).

The UK also ranks 5th when it comes to the digital skills of its populace, with 74% having at least basic and 49% having above basic digital skills. 89% use eGovernment services, which is almost 22% more than the EU-average.

Three out of four UK citizens have basic software skills and of all employees, 5,1% are ICT specialists. As of 2018, even the number of female ICT specialists was slightly above EU average (1,8% vs. 1,4%) which is generally a good foundation to fight current skill shortages.

More than one third of all British companies uses social media and 30% use cloud-based technologies. The eCommerce turnover is also slightly above EU-average with 13% (compared to 11%). Additionally, the UK scores much higher regarding its digital public services for businesses than the EU average.

According to Speedinvest, the UK is home to more than 180 healthcare startups and therefore ranks 1st in Europe when it comes to total funding (3,5 billion Euro investments). These startups cover a wide range of different healthcare topics which shows that the industry in general has a healthy innovation level.

Another strong sector is the UK's financial sector, with London being the second largest financial center in the world. Brexit, the pandemic and other developments in the markets as well as in user behavior have given a massive boost to new digital technologies (FinTech) here. A report from the University of Bath cites studies showing that 88% of traditional financial firms are concerned about losing revenue to FinTechs. At the same time, 82% of all companies that are not currently active in the FinTech sector are expected to collaborate with FinTechs in the future in order to keep up with the competition.

The Weaknesses: Individual gaps might cause future hurdles

Back to overview

Although the UK has a high broadband take-up, UK lags behind when it comes to fast internet speeds. Only 19% of all households have taken up 100Mbps fixed broadband and despite a high fast broadband coverage, very high capacity network coverage is only at 10% compared to 44% EU-wide.

The skill shortage reaches the island

Although the UK was well positioned when it comes to ICT professionals in 2020, the question is whether Brexit has caused a so-called "brain drain" in the last two years, as many expats have had to leave the country or global companies have migrated their employees to locations. According to a recent UK report, just under one in two companies are looking for employees who bring digital skills with them.

46% have been struggling to recruit the right professionals for the past two years. The fact that Brexit has also made the education pathways for international professionals more complex means that not only the current labor market is affected here, but also future ones. In fact, the government is already making efforts to issue visas for ICT workers, even in the short term.

Companies lack a cohesive digital strategy

Although companies use the cloud, social media and have eCommerce options, only one fourth makes use of electronic information sharing (24% vs. 34% EU-wide). However, since these numbers are from 2019, it is very likely that companies have changed their attitude towards this technology due to the pandemic.

For the UK, it is not overall digital readiness that is the problem. As in many other countries, some industries are better positioned than others. According to reports, digital laggards can be found in manufacturing and also in education.

In particular, industries that were not digitally innovative or global leaders in the first place now face even greater challenges when it comes to the many political, economic and social changes associated with the need to digitize not just processes, but entire business models.

For example, according to McKinsey, manufacturing productivity in general has stagnated more or less since 2010 which also indicates a lack of productivity technologies and innovations. Due to this lack, labor costs are "higher than those of any other major manufacturing nation." McKinsey identifies a holistic strategy as one of the main hurdles since many manufacturers do invest in technologies such as the Internet of Things or artificial intelligence but fail to leverage it across the entire operation and supply chain.

Additionally, (internal) skills and expertise are not sufficiently strengthened and promoted. For example, there is often a lack of comprehensive offerings for retraining and continuing education to provide employees with the necessary digital skills and thus defy the shortage of skilled workers through a strong internal training offering.

In the Higher Education sector, meanwhile, institutions seem to do the bare minimum to uphold the status quo, instead of realizing that the digital transformation can also help restructure the entire educational journey for both students and faculty staff. Additionally, an IDC Study on EU education institutions (PDF) reports that UK universities and colleges reported a drastic increase in cyber attacks with 80-90% having experienced breaches or phishing attacks in 2020.

Summary: An uncertain future

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The UK has been through a lot of highly disruptive events in the last couple of years, however, both Brexit and the pandemic should have had a massive positive impact on the digital transformation as a whole, necessitating digital platforms, services, and business models to stay competitive and allow citizens, enterprises and organizations to act on the global stage.

However, especially the political situation has destabilized many parts of the UK's economy and despite the many advantages of digitalization, industries can only invest in a transformation if they have the budget for it. The future of the UK's digital potential therefore is currently in the air: will companies and organizations invest in the digital transformation, thus helping keeping the UK's global influence afloat? Or will the economic disruptions cause a lack of investment and stifle the UK's development? At least for individual industries (e.g., the very strong financial sector), it seems realistic that they will go for the former option. For industries that were struggling even before the pandemic, it could become even more difficult, though.

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by Juliane Waack

Juliane Waack is Editor in Chief at DIGITALL and writes about the digital transformation, megatrends and why a healthy culture is essential for a successful business.

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