The UK's first digital economy is a modern success story, but regional disparities in infrastructure, investment, and skills are. hindering its full potential. techUK's latest Local Digital Index highlights the urgent need for targeted action to bridge the digital divide and drive economic growth across the entire country.

Since the start of 2025, there have been a number of announcements from the Government: the AI Opportunities Action Plan, the Prime Minister affirming his desire to ‘cut the weeds of regulation’ to boost growth, and Chancellor of the Exchequer, Rachel Reeves MP, has proclaimed she wants to go ‘further and faster to kickstart economic growth’.      

And this can’t come soon enough. Growth in the UK in November 2024 was, regrettably, 0 per cent. Economic forecasts have been downgraded following a sluggish end to 2024 and start to 2025 with the Bank of England cutting interest rates in February 2025 but also cutting the 2025 growth forecasts to 0.75 per cent in the year ahead. Some forecasters are saying there’s opportunity to rebound in 2025 but with a big asterisk of ‘subject to geopolitical events’. Following the events of recent years such as Covid-19, the war in Ukraine, AI breakthroughs and the most recent US election, who can blame economic analysts from adding that caveat?     

The UK isn’t immune from world events but in a global economic race where in terms of GDP if you’re not growing and going forward then you’re going backwards, 0.1 per cent growth in UK GDP in Q4 2024 is not motivating companies, investors and the market.

Insights from the Local Digital Index In December 2024, techUK published the fourth iteration of our Local Digital Index, kindly sponsored by BT Group and Moore Kingston Smith, and in partnership with The Data City.

The Index is a measure of the strength of the digital economy across the UK in different components such as digital infrastructure, skills, finance and investment and R&D, and digital skills. It’s designed to aid elected officials, policy makers, companies and other stakeholders about the UK digital economy landscape, and to offer some suggestions on how it can be improved in the future.     

It’s fair to say that the growth of the tech sector in the UK is a modern economic success story: a sector GVA of £99 billion, circa 1.7 million employees and a growth rate of 9.3 per cent show just how important that tech sector is to the UK economy, not to mention to our public services, businesses, processes and way of life. There will be very few people in the UK who wake up in a morning and find that as they go through their day they aren’t interacting with technology.     

But that doesn’t mean there aren’t challenges, including some unforeseen ones, and that we shouldn’t be alive and alert to how we can address them if we want to be at the cutting edge of growth, innovation, and better services.

Infrastructure gaps 

Let’s take a look at digital infrastructure. The Index has shown, and previous iterations of the Index data prove, that great strides have been made in the roll out of superfast broadband, gigabit broadband and 5G across the UK. Some of the black spots in 2025 won’t surprise anyone – Shetland Islands, Isle of Scilly, High Peak, North Norfolk – but there is also the City of London. Interestingly, 57 per cent of properties in the City of London have access to gigabit broadband, compared to 65 per cent in the Forest of Dean.     

Data centres have also become the hot topic of discussion, partly driven by the growth of AI and need for data centre capacity and energy requirements. techUK’s Index also maps the data centres across the UK and the high voltage power routes coming into the UK. This shows significant data centre presence in London and Manchester but also opportunities for other areas such as Scotland, Wales and North East. And if you want to know more, then this report on ‘how data centres can supercharge the UK economy’ is a good start.

AI zones & investment 

The Government’s AI Growth Zones announcement and call for expressions of interest is a positive move (see more here) but details are still TBC on funding, the number of zones and regulations around these zones. Data centres and AI Growth Zones can’t be in every community nor should they be, so these details need clarifying sooner than later to ensure the UK makes 2025 a year of growth.  

Innovation beyond the south 

Growing tech firms, especially scaling firms with high growth potential, need regulations and legislation to allow them to innovate and thrive. But they also require the local conditions and funding to grow. Unsurprisingly, techUK’s Local Digital Index shows that firms in London, Oxford and Cambridge score well in terms of access to private investment.      

In terms of R&D investment in England, London, the South East and the East of England receive 64 per cent of the funding. There’s an argument to say that makes sense given the location of the institutions and population figures. However, this means that spin out firms and growth opportunities from these locations need to be even greater to drive economic growth in the UK.      

It’s not all doom and gloom for areas outside the South of England. When we map ‘innovative companies’ across the UK, we can see that our big cities – Manchester, Birmingham, Leeds, Edinburgh, Glasgow, Cardiff, Belfast – have a high propensity of ‘innovative companies’. There’s a strong argument for building up these economic centres, giving greater access to finance including InnovateUK funding, and using the Local Growth Plans to support sectors ripe for growth. This would help rebalance the UK economy and reduce some of the pressure of growing the economy on London and the South East.  

The skills shortage 

Finally on skills. Put simply, the data available needs to be better and from what we do know there aren’t enough skilled professionals that the tech sector needs to grow. Take Greater Manchester, in 2024 there were 39,373 STEM job roles advertised. That was more than any other city region in the UK. West Yorkshire, West Midlands and West of England were next, London and Cambridge were about 15-20,000 roles behind Greater Manchester. Skilled people will help drive growth, and this shows that roles in the sector aren’t confined to the South of England… however, that is where a lot of the funding is!

Last December, techUK was pleased to have the Mayor for Greater Manchester, Andy Burnham, launch the Index. He spoke about his commitment on skills through the Manchester Baccalaureate, and he felt addressing this would be the single biggest factor in determining the success of the Greater Manchester digital economy. “At this moment in time, the kids can see the skyscrapers from their bedroom windows, but they can’t see the path to them” said the Mayor, highlighting the need for the public, private and third sector across the UK to collaborate to meet the challenge.     

techUK has put forward a number of recommendations that we believe will support and grow the tech sector, grow the economy and support everyone to be included in the digital economy. Support for scale ups, targeted efforts toward rural and coastal communities, devolving digital inclusion efforts, supporting more public sector innovation collaboration, and more testbeds and trials across the UK.     

Achieving the economic growth we want and need doesn’t have a silver bullet. It’s going to take effort, collaboration and a commitment to delivery across the entire UK. Right now we need to be setting the conditions and building the market for UK tech companies to grow further and faster.