On 11 March 2020 the new Chancellor Rishi Sunak unveiled the first budget of the new Government. Along with a fiscal package to help mitigate against the economic and social costs of COVID-19 the budget also contained a large number of announcements for the tech sector.
The start of something new
While the budget did not produce concrete measures to update regulation or competition policy, a number of announced reviews and consultations could pave the way for sweeping reforms, potentially impacting how the entire UK digital economy works.
A cross regulator task force for the digital economy
The Budget revealed that the Government will accept all six of the Furman Reviews’ strategic recommendations for unlocking digital competition. This is a good step, techUK welcomed the Furman Review in 2019 with its focus on better understanding digital markets, urging Government to promote competition and ensuring that across Whitehall a better understanding of competition in the digital economy is developed.
However, in a major step forward the Government also announced a new cross regulator task force based in the Competition and Markets Authority (CMA). The cross-regulator taskforce will report to the Government in six months on a new pro-competitive regime for digital platform markets. This will include advice on implementing a pro-competitive code of conduct for digital platforms with strategic market power.
The Government has said that it will also look at existing domestic and EU derived regulations that might hinder digital competition and entrench monopoly behaviours. The review will aim to ensure that regulatory reforms applying to digital and tech businesses are pro-innovation and coherent.
This is a potentially huge announcement, with the UK due to exit the transition period on 31 December 2020 the Government will have increased flexibility to change competition rules. This review could therefore form the basis of a distinct UK competition policy for digital markets with possibly wide-ranging effects.
Digital competition is a global, not just a UK issue. techUK is keen to see the UK take a lead in promoting competition policy which unlocks the innovation power of actors across the digital economy and will engage with the CMA team to ensure that as this review is completed it is done so in partnership with industry.
Reforming regulation initiative:
One of the biggest risks to digital and tech companies is uncoordinated regulation. Rightly, as the economy has become more digital, Government and regulators have moved to try to keep up to date with these changes. However, in the UK this regulation has often come from multiple directions in an uncoordinated fashion making it harder for business to operate while not always achieving the intended aims of the regulator.
techUK is therefore happy to see the Government make a specific commitment in the budget to strive to achieve the right balance between supporting excellent business practice and providing protections for people and the environment.
The Budget announced that BEIS is launching the Reforming Regulation Initiative. This will invite ideas from business and the public for regulatory reform in order to ensure that regulation is sensible and proportionate. techUK will be feeding into this to ensure the Government meets these aims.
Regulators pioneer fund:
techUK welcomes the announcement of a second round of the Regulators’ Pioneer Fund. The fund has been hugely successful at building better connections between regulators and tech companies to help them construct and test innovative new products.
The additional £10 million of funding will enable regulators to continue this work, unlocking the potential of emerging technologies and helping businesses to develop innovative products and services. techUK would encourage the Government to review the success of the second round and consider creating an annual funding round to increase opportunities for experimentation and innovation.
Further, reviews, discussion papers and consultations:
The Government also announced a number of other key reviews which techUK will seek to engage with.
A Fintech review and delivery panel, the publication of the Bank of England’s discussion paper on a possible UK central bank digital currency (CBDC) and a Government led consultation on Cryptoassets.
techUK wants to see these various reviews, discussion papers and consultations, as well as the cross-regulator task force, support policymaking for a pro-competition environment for digital and tech companies.
Incentivising companies to digitise and see digital as core to the competitive edge is key for the future growth of the UK economy and its competitiveness to near neighbours. When it comes to digital adoption, the UK trails behind many of its European counterparts, as well as other nations across the world. 42% of UK firms buy cloud computing services, compared to 65% in Finland, 57% in Sweden, and 56% in Denmark.
There are numerous benefits for firms, especially small and medium-sized enterprises (SMEs), to adopting digital technology. These include productivity gains, access to new and/or bigger markets, and increased amounts of international trade.
In 2015, a Government study showed that 79% of SMEs had yet to receive advice on improving their digital capabilities. However, those SMEs that had improved their digital capabilities saw clear benefits: 54% saw increased sales, 53% reached new customers, and 30% saw overall cost-savings.