The tech legal outlook for 2025
Change is in air as the UK Government – along with new governments around the world – have a platform to deliver on election promises and pursue their tech ambitions. As tech advances, the UK Government needs to create the right regulatory environment to enable innovation and growth, and determine whether to take a more nimble and tailored approach or to stay closely aligned with the EU. We explore some of the key trends in the UK shaping the legal outlook for the tech sector.
Signs of recovery in tech M&A and investment
With growth in the value of global tech M&A and investment in 2024, there is a more positive outlook for 2025 despite the geopolitical and economic headwinds. Tech was the most targeted sector for M&A across the globe in 2024 and while tech investment in the UK fell in 2024, the UK continues to attract the largest share of funding in Europe and ranks third behind the US and China in the list of top countries by AI funding raised in 2024.
We expect activity in the tech sector will continue to outperform other sectors as corporates seek strategic tech M&A and investment opportunities to drive growth, leverage AI and gain competitive advantage. With high levels of capital held by financial sponsors, and a backlog of companies looking to exit, we expect valuation gaps to narrow, deals to pick up and significant investment in key areas including AI, digital infrastructure, climate tech, fintech, cyber security and defence tech.
A change in approach to mergers?
In the last decade regulators globally have increased scrutiny of and intervention in tech deals, but there are some signs 2025 could see authorities more willing to consider innovative remedies where a deal would otherwise bring investment that can support growth. The UK’s Competition and Markets Authority (CMA) has already announced a review of its approach to merger remedies, aiming to foster a dynamic economy that rewards innovation and attracts investment. This sits alongside procedural reforms designed to facilitate complex remedies.
Greater focus on digital platforms
The CMA will have more powers to police digital markets under the UK’s Digital Markets, Competition and Consumers Act (DMCC) from January 2025. It empowers the CMA to designate firms as having ‘strategic market status’, impose tailored codes of conduct (enforced by the CMA with fines up to 10% of global turnover) and bring pro-competition interventions (including structural separation) on those firms. The regime also creates fertile ground for private litigants to pursue designated firms.
Big fines for small print?
The DMCC also gives the CMA the power to take direct enforcement action and impose penalties for breaches of consumer law, instead of going through the courts. These reforms apply to all businesses operating in the UK and significantly increase the risks of non-compliance with consumer law as well as making it easier for consumers to bring claims against businesses found to have breached consumer law by the CMA. The tech sector is expected to be an early target for enforcement.
Increasing action on online safety
In December 2024, Ofcom published its first codes of practice and guidance on tackling illegal harms under the UK’s Online Safety Act (OSA). The OSA is one of the world’s most ambitious pieces of online safety legislation, imposing significant obligations on up to 100,000 services. The obligations on providers become enforceable following publication of the codes of practice and guidance and secondary legislation being approved by the Secretary of State. In-scope providers have until 16 March 2025 to complete conduct illegal harms risk assessments and Ofcom sets out more than 40 safety measures for platforms to introduce from 17 March 2025.
Agreeably light-touch regulation for AI?
The UK Government signalled the introduction of new AI laws in 2025. Details are sparse but the law is likely to be narrowly targeted on “frontier” models; unlike the EU AI Act which has slightly broader application.
In the meantime, the cornerstone for the regulation of AI in the UK is the GDPR. The Information Commissioner set out its position on AI in December 2024 and flagged a number of concerns about the use of public data to train AI models.
The UK remains locked in the orbit of the GDPR
The Data (Use and Access) Bill was introduced to Parliament in a third attempt to reform the UK’s data protection laws. In the wake of Brexit, there were proposals to replace the GDPR with a “Framework of Citizen Data Rights” using a “common law” approach to regulate innovative new technology such as AI and blockchain. However, in practice, there was little interest from industry and such radical reforms would have had a catastrophic impact on data transfers from the EU. As a result, the Bill contains only very modest changes and leaves the UK firmly locked in the EU’s regulatory orbit.
Heightened litigation risks
Tech companies are increasingly at risk of large-scale litigation in the UK and the EU due to increasing regulatory scrutiny and strong political and legislative support for litigation funding and class actions. Litigation funders have invested heavily in antitrust claims against large tech companies. As a result, antitrust actions have increased dramatically in recent years and we expect that to continue, and to see class actions against tech companies supported by funders in increasingly diverse areas including data privacy and online safety.
Major changes to worker rights
2025 looks to be a significant year for UK employers as they come to terms with the implications of the UK Government’s recent budget and its proposals to implement major changes to worker rights. Consultation on many of the reforms will begin in 2025 and whilst the majority of reforms will take effect no earlier than 2026, many will pose significant change for many tech companies: from the change to unfair dismissal to a ‘day one’ right, to changes in flexible working rights and a new right to a guaranteed hours contract for zero and low hours workers, as well as other changes including the creation a single status of worker, which many gig-economy companies will watch closely.
Looking ahead
In 2025, organisations will need to navigate this complex and evolving legal landscape with care to pursue opportunities and tackle the challenges presented by rapid tech advances, increasing digital regulation and enforcement, and heightened litigation risks.
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