The impact of technology on UK's business environment

The United Kingdom can boldly be described as a tech powerhouse, ranking 4th among the 132 economies featured in the GII 2023 and 3rd among the 39 economies in Europe. It is known to generate high innovation output, which attracts more technology-driven investments. The country also has high internet penetration, with about 98% of the population having access to the internet. This favourable tech environment has played a big role in the UK’s economic growth. In fact, its GDP is estimated to have increased by 0.6% in Quarter 2 of 2024, following an increase of 0.7% in Quarter 1.

The benefits of technology are not experienced in the digital sectors alone; other businesses that have taken advantage of it have become more productive, regardless of the sector. Actually, a survey of 1,000 UK-based businesses done about a year ago showed that digital skills helped boost revenues by 4.4% and reduce costs by 4.3%. Let’s look at some key areas of technology that have affected the UK’s business arena.

Financial technology
The underlying blockchain technology of Bitcoin has paved the way for numerous fintech innovations in the UK. Nobody likes the hassle of queuing in long lines to access financial services – and that’s where fintech comes in. The incredible blend of finance and technology has reinvented the traditional banking system in the UK. This has brought about simplified transactions, reduced costs, improved security and better customer experiences. As of March 2024, the country had roughly 3,168 fintech companies – representing Europe’s largest fintech market.

The fintech umbrella includes various sectors such as digital banking, mobile payments and digital wallets, peer-to-peer lending platforms, robo-advisors and algorithmic trading, Insurtech, blockchain and cryptocurrency, regulatory technology, and crowdfunding platforms. Steve Carter, Head of Corporate Finance, PwC UK, expressed that the right partnerships between those sectors would have greater social and economic impact.
Financial service providers are now inclining more towards technology and cloud services than physical locations to streamline their processes and offer you innovative, personalized financial solutions. This is good for business, seeing as the sector contributed to the UK economy with over 76,000 jobs, over half of all UK unicorn companies, and over $5bn of inward investment in 2023. Innovate Finance, the industry body for UK FinTech, launched its FinTech Plan for Government, which, if accomplished, could add £328 billion to the UK economy over five years.

E-commerce
In this digital age, nearly 60% of people worldwide prefer to shop online for various reasons. In the UK, 48% of consumers say it’s because of convenience, and 37% say there is a wider variety of products. All in all, e-commerce is becoming more popular, and businesses are restructuring to meet the rising demand and the changing customer preferences. The advantage is that businesses can operate 24/7, engage with a global market and build brand awareness in the digital space. Now, there are over 580,0000 e-commerce-enabled websites in the country, and the numbers are continually growing.

High mobile subscriptions, estimated at 111.8 million people, and high internet penetration in the UK make it conducive for e-commerce to flourish. Statistics show that at least 89% of people in the country had bought something online by the end of last year. No wonder it is the most advanced e-commerce market in Europe and the third largest in the world. The e-commerce sector contributes a revenue of around £2,089.6 billion to the country’s economy and is expected to grow by 8.8% in 2024.

Artificial intelligence
PwC UK predicts that the UK GDP could be up to 10.3% higher in 2030 due to AI. Businesses are using AI and machine learning to automate tasks, improve decision-making and enhance customer service. This has transformed workplace productivity by up to 40%, reducing human error and allowing the human workforce to focus on creative tasks. As a matter of fact, a recent report showed that large businesses in the UK could save up to 7.9 billion employee hours through the use of AI, unlocking £119 billion worth of productive work.

Presently, over 33% of all businesses in the UK have adopted some form of AI tool or service, from IT and telecom to hospitality, health and even the legal industry. Statista estimates that the AI market in the UK will exceed 4.5 billion pounds in 2024. Though things seem to be picking up quickly, knowledge, skill and strategy in using AI must catch up. A survey revealed that only 20% of those planning to invest heavily in AI have a solid understanding of how they can utilize it. TechUK recommends that the government should look into equipping its people and businesses with the necessary tools to take advantage of the opportunities in the Fourth Industrial Revolution.

Conclusion
It is evident that technology has significantly impacted business in the UK in that there are smoother transaction ways, more convenient shopping options and increased work productivity. By continually taking advantage of tech, the country is more likely to attain the government’s mission of achieving the highest sustained economic growth in the G7 sooner.