Data economy needs strong backing from government to weather constitutional challenges

It barely needs to be stated that Scotland’s and the UK’s data and wider digital economy is ever-more pivotal part of the economy. With grand aims to become the ‘data capital of Europe’, to be the ‘safest place in the world to go online’ and to be a global fintech hub, government policy—from Westminster and Holyrood—needs to deliver comprehensive and full-throated support.

The will from both the Scottish and UK Government is certainly there. City deals, sector deals, national AI and data strategies and a range of legislative proposals to put consumers in control of their data and protect from online harms tell us that things are going in the right direction.

While the pace of change is always an issue—and often government is playing catch-up—some of the proposals from both governments are genuinely world-leading.

Nonetheless, the sprint towards innovative digital economies is not without its formidable hurdles: constitutional uncertainty surrounding Brexit; the potential for a second independence referendum; and a decade of stagnant growth and unfavourable economic circumstances.

Going forward, and irrespective of the political arguments for or against Brexit, the vast majority of economic analysis suggests that, regardless of the type of Brexit deal, more economic difficulty will follow.

If this happens, it will no doubt be tempting for governments to pull back on policies they deem not central to immediate economic recovery. Indeed, when the prospect of no-deal rose earlier this year, the UK Government’s plan for the National Data Strategy was shelved.

However, doing this would be a mistake. The success of the data economy holds the key to wider economic success. The data and digital economies could throw a lifeline to a sinking economy.

The UK currently has the largest data centre market in Europe, valued at £73bn. ScotlandIS research estimates that the digital technologies sector contributed £5.9bn to the Scottish economy in 2016, more than 4% of total GVA. GVA per head generated in the digital technologies industry is £78,000, which is three-times the Scottish average of £28,000.

The sector’s GVA is forecast to grow by 38%, over the period to 2024, making it the fastest-growing sector in Scotland; more than twice the rate of 17.5% for the economy overall. Data-driven innovation alone could deliver £20bn of productivity benefits in the next five years.

According to PWC research AI expansion in Scotland will result in a net gain of 14,000 jobs. In 2017, about 9,400 digital technologies businesses were registered in Scotland which makes up 5.4% of the business base in Scotland.

Engagement in international markets remains at a high level with 64% of businesses reporting they are already exporting and another 17% planning to do so in the future. 80% of digital economy businesses planned to expand their workforce in 2018-19.

The figures are mirrored in the UK’s other tech centres.

The importance of the UK and Scottish Government in aiding this impressive pace of growth and success in the data and digital industry cannot be understated. Not solely because this economy itself can increase in value and contributions to general wealth, but because the innovation and growth of the digital and data sphere have enormous knock-on effects to the wider economy. Virtually all industries receive significant benefit from the data and digital economies. The energy, finance and banking, hospitality, tourism, advertising and marketing industries central success is reliant on digital innovation. Such innovation also increases effectiveness and efficiency and delivery of public services, giving better value for money.

Above all, it is time that the data and digital industry be considered part of the core economic structure of the UK. Signs show this is being acknowledged, with the recent revival and further investment in the national data strategy in spite of Brexit uncertainty. However, governments must not be afraid of investing in policy development even in times of constitutional and economic strife.

The DMA lobbies in Brussels, Westminster and Holyrood to advance issues of importance to the data and marketing industry.

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