UK Tech in 2025 and what comes next for 2026

Regulation, resilience and why continuity is back on the board agenda

If you only looked at the headlines in 2025, you could be forgiven for thinking the UK tech story was confused. 
On the one hand, the numbers still look impressive.

On the other, funding, exits and insolvencies all tell a more fragile story. For regulated customers and their software vendors, the common theme is simple: third party resilience is no longer a “nice to have”, it is becoming a regulated expectation.

This article pulls together some of the key developments from 2025 and looks at what they mean for continuity planning, third party risk and the role of software and SaaS escrow.

1. UK tech in 2025: strong headline, messy underneath

According to the Tech Nation 2025 report, the UK tech ecosystem is now valued at around 1.2 trillion US dollars, making it the largest in Europe and more than double the combined value of France and Germany. London alone accounts for close to 60 percent of that value. 

Funding data shows a similar pattern. The latest State of European Tech analysis suggests UK startups raised around 14 billion US dollars in 2025, again the largest figure in Europe.  Other coverage notes that UK based tech companies attracted more investment than firms in France, Germany and Switzerland combined, underlining that London and other UK hubs are still a magnet for capital.

At the same time, the route to public markets has narrowed dramatically. IPO fundraising on London markets in the first half of 2025 was only about 160 million pounds, the lowest first half in at least thirty years. Research from RSM UK still finds that London remains the preferred IPO destination for UK tech firms, but the pipeline is thinner and valuations are more challenging than a few years ago. 

Insolvency data paints an equally mixed picture. PwC analysis shows that startups now make up a smaller share of total insolvencies than they did over the previous decade, but overall corporate insolvencies remain near multi decade highs and could exceed 24,000 in 2025 if current trends continue. 

For customers and their legal teams, the takeaway is that UK tech is still high growth and investable, but also exposed to funding shocks, exit bottlenecks and failures. That combination is exactly what keeps operational resilience and continuity on board agendas.

2. A tougher regulatory climate on third party dependencies

EU DORA and the first “critical ICT” list

In November 2025, the European Supervisory Authorities published the first list of 19 “critical ICT third party providers” under the Digital Operational Resilience Act (DORA). These include major cloud, infrastructure and telecoms providers that sit at the heart of EU financial services. Once designated, they are subject to direct oversight around resilience testing, incident reporting and concentration risk. 

DORA applies directly to EU financial entities, but its logic is broader. If a bank or insurer is now under pressure to understand and manage the resilience of its infrastructure providers, it is only a small step to asking tougher questions about all of the software vendors in its stack, including niche SaaS platforms.

The UK “critical third parties” regime

The UK has created a parallel regime through the Financial Services and Markets Act 2023, which gave the Bank of England, PRA and FCA new powers over “critical third parties” to the financial sector. The regulators finalised the rules in November 2024 in a joint policy statement (PRA PS16/24 and FCA PS24/16) and a supervisory statement SS6/24. 

A few key points:

• HM Treasury designates a critical third party where disruption to its services could threaten the stability of, or confidence in, the UK financial system.
• Once designated, that provider will face direct oversight, including requirements around resilience testing, scenario exercises, and incident reporting, similar in spirit to DORA. 
• HM Treasury expects each recommendation from regulators to take around six months to process, from initial assessment through consultation and final designation.

As of late 2025, no critical third parties have yet been formally named. Correspondence between HM Treasury and the Treasury Committee confirms that the rules took effect in January 2025, but will only apply in practice from the point firms are actually designated.

However, a recent Financial Times report quotes City minister Lucy Rigby telling MPs that she expects at least one provider to be designated by “this time next year,” while acknowledging the process depends on regulators’ recommendations. 

For financial services firms, the direction of travel is clear. Concentration risk around large cloud and infrastructure providers is now a regulated issue, not just a theoretical one. For software vendors that sell into that world, the knock-on effect is more detailed due diligence on continuity, subcontractors and recovery planning.

The UK Cyber Security and Resilience Bill

In parallel, the UK government has introduced the Cyber Security and Resilience (Network and Information Systems) Bill to Parliament, on 12 November 2025. The Bill will update and expand the existing NIS regime, with:

• broader coverage of sectors that provide essential services
• stronger, more consistent incident reporting obligations
• enhanced enforcement and information sharing powers for regulators. 

The government’s own summary describes it as a “step change” in how harmful cyber attacks are reported and managed, aimed at improving resilience and economic stability. 

Again, this is not a software escrow rule. It is a signal that boards are expected to understand dependencies, plan for disruption and maintain credible recovery options in the face of adverse situations.

3. Market structure: software escrow goes global and consolidates

Behind the scenes, the software escrow market itself is changing.

One large provider has grown through acquisitions, including the 2021 purchase of Iron Mountain’s Intellectual Property Management and software escrow business, and the 2024 transfer of customer portfolios from a failed escrow provider. In 2025, its parent group announced that it is exploring “strategic options” for the escrow division, including a potential sale, with reports of private equity firms considering bids. 

Analyst reports also project strong growth for software and SaaS escrow globally, with multiple market studies forecasting high single digit to low double digit compound annual growth over the rest of the decade. Driven by increased cloud adoption, regulatory scrutiny and the need for independent continuity mechanisms. 

For beneficiaries, the message is that software escrow has become part of a much larger conversation about operational resilience and third-party risk in regulated sectors. For vendors, it is increasingly viewed as a hygiene factor when selling into financial services, the public sector, other regulated environments and enterprises who rely on third-party applications as part of vital business processes.

4. AI, continuity and the new generation of dependencies

While 2023 and 2024 were dominated by the hype around generative AI, 2025 has been about integration. Barclays research shows that almost nine in ten UK businesses are looking to AI to solve key business problems, with average spending of around 235,000 pounds on AI and emerging technologies over the past year, and most firms planning to increase that spend.

Our separate article on AI enabled SaaS explores this in more detail, but at a high level, AI raises several continuity questions:

• core functionality in SaaS products may now rely on external AI services, models or pipelines that the vendor does not fully control
• training data, prompt libraries and fine tuned weights are often as important to continuity as source code
• AI or data science workstreams can introduce silent changes to behaviour over time, which complicates recovery, testing and legal allocation of risk. 

From a legal and risk perspective, these are still third-party dependency and continuity issues, even if they are wrapped in AI language and adoption of these solutions from innovative but possibly less mature scale up technology companies is inherently riskier.

5. What this means for legal teams, clients and software vendors

Bringing this together, there are a few clear implications for UK Tech businesses:

For legal teams advising customers

• Third party risk frameworks are becoming more prescriptive, especially in financial services. DORA in the EU and the critical third-party regime in the UK both push firms to map dependencies, test scenarios and evidence resilience. 
• Contract structures are evolving toward clearer continuity, exit and transition arrangements, including defined recovery objectives and obligations to support handover or replication.
• Where a service is genuinely critical, independent mechanisms such as software escrow or SaaS escrow are increasingly aligned with regulatory expectations, rather than being seen as belt and braces.
• For beneficiaries of software escrow
• Customers are operating in a market where insolvency and funding risk remain real, despite strong ecosystem valuations.
• The same regulators that worry about concentration in cloud and critical ICT services are likely to view credible continuity plans, including software escrow, positively in internal audits, supervisory reviews and board level reporting. 

For software vendors

• Enterprise and regulated buyers will continue to ask more detailed questions about your dependency chain, including your own cloud providers, AI components and key subcontractors.
• Being able to point to a robust software escrow or SaaS escrow arrangement, backed by appropriately verified and tested procedures, can shorten sales cycles and support procurement approvals, especially where operational resilience is an important success criteria when embedding a new solution into a critical operation and live topic with the board.

Where software escrow fits in

All of the developments above point toward the same conclusion. Heading into 2026 regulators, boards and customers expect a more professional approach to continuity, third party risk and recovery. More scrutiny will be placed on suppliers when going through vendor due diligence and onboarding. Building trust between a supplier and client will be as important as ever, so structured approaches to enable collaboration will be key. Vendors who weave this thinking into their sales process early will stand out. Others may experience longer procurement cycles, especially as buyers become more risk-aware and funding focuses increasingly on demonstrable resilience alongside AI innovation.

Software escrow and SaaS escrow give parties a structured, legally recognisable way to build that continuity into contracts, especially where source code, cloud infrastructure or AI components are under the control of a single vendor.

If you would like to discuss how modern software escrow and SaaS escrow structures can support your third-party risk and operational resilience arrangements, The Escrow Company would be happy to help.