Tech & Sourcing @ Morgan Lewis


In June 2022, the UK government published its cross-government UK Digital Strategy for creating a world-leading environment in which to grow digital businesses. The Digital Strategy brings together various initiatives on digitalization and data-driven technologies, including the National AI Strategy. The government states that it is actively seeking to grow expertise in deep technologies of the future, such as artificial intelligence, next generation semiconductors, digital twins, autonomous systems, and quantum computing.

Record levels of private capital investment in the UK technology sector over the past year create a significant incentive to ensure that the Digital Strategy strikes the right balance between building public trust in new technologies and encouraging innovation and growth. Leveraging the UK Digital Regulation Cooperation Forum (DRCF), which we described last year, the Digital Strategy includes as a key objective adopting a “light-touch, pro-growth regulatory regime,” as further described below.

Key Takeaways

The Digital Strategy lists over 100 specific actions that the government intends to take, taxonomized into six areas:

  1. Foundations and infrastructure of a digital economy
  2. Generating ideas and intellectual property
  3. Digital skills and talent
  4. Financing of digital growth
  5. Levelling up across the whole of the United Kingdom
  6. Enhancing the United Kingdom’s place in the world

For the UK technology sector, there are several key takeaways across these areas that are worth noting:

  1. A light-touch, pro-innovation regulatory framework: The government is inviting recommendations from stakeholders for opportunities to lighten the regulatory burden on digital businesses and to actively promote innovation. Under its Plan for Digital Regulation, the government states that it intends to take an outcome-focused approach, supported by robust evidence of the impact of interventions, and establish a streamlined and proportionate approach to monitoring digital technologies and businesses. The DRCF will work to create a more coordinated regulatory landscape across regulatory regimes. While the Digital Strategy gives little detail as to specific changes or regimes that may be coordinated, the government published on the same day a policy paper on its proposed approach to regulating AI which may indicate the government’s likely approach. Look out for our further Tech & Sourcing post on this proposal.
  2. Reforms to the UK data legislative framework: On July 18, the government introduced into parliament the Data Protection and Digital Information Bill to reform and simplify parts of the UK General Data Protection Regulation, including the definition of “personal data,” the position of data protection officer, and risk assessments of international data transfers. In addition, the government plans to introduce primary legislation to facilitate the access and sharing of data by consumers and small businesses with trusted third parties; the government terms this “Smart Data.”
  3. R&D tax reliefs: To incentivize innovation, the government is expanding research and development-related tax reliefs to cover cloud computing and license payments for datasets, and is continuing to review such tax reliefs to ensure they remain fit for purpose.
  4. Promoting innovation and competition: The government recently published its response to its consultation on a pro-competition regime for digital markets, and it is preparing to publish a new statutory regime in the near future. You can read more about the government’s response in our prior blog post..
  5. UK National Security and Investment (NSI) Act powers: As to investment in the UK technology sector, the government warned that it will take action under the NSI Act where needed in order to protect highly sensitive technology and maintain domestic capability in critical areas.
  6. Opposing unjustified data localization: In its engagement in international public bodies, the government will seek to secure the free flow of data, and it will ensure that anti-data localization provisions are included in trade agreements with other countries.

Morgan Lewis will continue to monitor regulatory and other developments of the UK Digital Strategy.