2024 Outlook: What are 5 key Tech trends to be aware of in the UK?
This guest insight has been provided by Derek Tong, Global Technology Sector Leader at Linklaters
You can find Derek's bio at the bottom of the page
Geopolitical risks, economic uncertainty and tightening regulation are creating a challenging outlook for 2024. Yet the rise of generative AI is driving digital change, and this is bringing investment in advanced technologies and digital infrastructure.
Companies and investors seeking to leverage the vast potential of AI and advanced tech must address the risks associated with these technologies. To succeed, they will need to navigate increasing digital regulation and enforcement, and heightened cyber and litigation risks.
This article explores 5 key global trends in the technology sector that we believe will shape the legal outlook for UK tech companies in 2024 and beyond.
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Maximising the potential of AI
The rise of generative AI in 2023 has brought new insights into the potential for AI to transform business and drive digital change. To unlock the potential of AI in 2024 and beyond, organisations will need to address the evolving legal landscape and establish the right governance and risk management to safeguard their interests.
While there are concerns about the existential threat AI could pose to humanity, more immediate concerns focus on the lack of transparency, the risks of inaccuracy and biased outputs, and the need to protect privacy and intellectual property. Elections in 2024 raise the spectre of AI being used to generate vast quantities of disinformation, deepfakes and highly personalised propaganda to influence election outcomes which could undermine trust in democracy and technology.
There have been hundreds of AI-related initiatives at international, inter-governmental, regional, and national levels. We expect to see further international cooperation in 2024 as momentum builds following the AI Safety Summit in the UK, the UN’s proposed AI advisory body and the G7’s Hiroshima Process Guiding Principles published at the end of 2023.
We also expect to see the further development of AI specific regulation across the globe in 2024, in addition to the EU AI Act and Biden’s Executive Order on AI.
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Tech advances are driving investment
Tech M&A and investment activity has fallen from the record levels seen in 2021 and the first half of 2022 which was an exceptional period for the sector enabled by low interest rates and pandemic-fuelled demand. The increased cost of financing, high inflation and regulatory scrutiny in the sector has meant that investors and corporates are approaching tech M&A and investment with more caution. Deals are taking longer and tightening regulation has made them more complex.
However, we anticipate that certain tech verticals will continue to draw significant investment in 2024. Governments and corporates recognise the strategic importance of investing in technologies like AI to adapt and grow, to improve efficiency and productivity, and to meet their net zero commitments.
The increasing adoption of technologies such as artificial intelligence, the internet of things, and enterprise cloud computing are driving greater demand for higher computing capacity and data storage for the growing mass of digital data created and consumed worldwide. This in turn is driving investment in digital infrastructure such as data centres and tower infrastructure which are critical to enabling the digital economy. For example, the number of deals involving data centres has increased steadily over the years, recording a compounded annual growth of 32% from 2017 to 2022 and the momentum has continued in 2023. The outlook for digital infrastructure investments – particularly data centres – therefore remains positive globally.
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Tech M&A receiving increased merger control scrutiny
There is consensus among antitrust authorities across the globe that tech deals can raise significant competition concerns and as a result, regulatory hurdles to M&A are rising. It has become harder than ever to predict precisely where and how concerns arise, and the conclusions different regulators will reach on whether a deal is problematic.
In the UK, the CMA – which has in recent years become the most feared merger control authority for tech M&A – has had a less interventionist year, unconditionally clearing several deals that were referred to an in-depth investigation in Europe. However, the CMA’s approach to the Microsoft/Activision merger demonstrates how unpredictable the CMA process can be and the power of the authority to extract significant concessions.
Around the world we see the complexity and duration of reviews extending, with investigations being ever more burdensome, and so early strategising and risk allocation will be critical for parties to international mergers.
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The UK’s Online Safety Bill is finally law
In October 2023, the UK’s long-anticipated Online Safety Act (OSA) became law. The OSA is one of the world’s most ambitious pieces of online safety legislation, imposing significant obligations on up to 100,000 services.
As the OSA comes into force, in 2024, regulated services will need to continue mapping laws and regulations that apply in different jurisdictions and continue to build and refine their frameworks to meet the requirements of the new regimes. The pace of change in regulation is rapid so platforms need to invest now to ensure they can keep up with the new expectations regulators are placing on them across the world.
Further legislation is also required before most of the OSA provisions come into force, including those relating to the “duties of care”. In fact, Ofcom does not expect the first substantive duties – those relating to illegal content – to apply until the end of 2024.
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The ever-changing landscape of cyber regulation
In a digital world fuelled by data, cyber risk has become an-ever present danger. High-profile cases have highlighted the significant financial and reputational costs of a cyberattack. Businesses will need to adapt to safeguard their data, ensure operational resilience and comply with new cyber specific legislation.
It will be more important than ever in 2024 for companies to ensure that their cyber security programmes (including policies, procedures, and safeguards) are fit for purpose and reflect the evolving regulatory landscape.
So, is the outlook positive amid this change? Simply, yes. Navigating the risk and regulatory landscape is getting harder but there is opportunity in the market, and companies can leverage the vast potential new technologies can bring.
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Authors
Derek Tong
Derek is a corporate partner in the London office and one of the firm’s global tech sector leaders.