New research finds that UK data regulation is costing British tech businesses an estimated £5.3 billion a year
Over half of the technology businesses surveyed reported not undertaking a business activity due to data regulation
Most people experience data regulation pretty much every day through those insufferable cookie pop-ups. This tick box process of getting user consent ultimately benefited nobody while practically annoying everyone. Hundreds of millions of human hours have been spent clicking through those things on websites across the internet. The previous Conservative government promised to get rid of these as a Brexit benefit, and so has the European Union, though both struggled without untangling the underlying regulation.
The impact of the General Data Protection Regulation (GDPR), however, has actually been far broader and more pernicious than cookie pop-ups. Previous studies indicate that the new regulation had pretty damning consequences. One study found that over a third of apps left Google Play after GDPR, and new app entry fell by 47%, while others have highlighted how it led to the consolidation of the ad tech market in favour of bigger players, Google and Meta, reduced revenue for smaller e-commerce players and cut US venture capital deals in the EU by 21%. As a result of the regulation, thousands of websites became inaccessible to European users.
Two-thirds (69%) of the 113 data-intensive technology businesses surveyed reported that compliance costs have risen over the past 5-10 years, while none say they have fallen, despite government attempts to reduce the burden in recent years
Previous studies, however, didn’t capture the rolling impact on British businesses – until now. New research, conducted by Freshwater Strategy and commissioned by the Computer & Communications Industry Association (CCIA), finds that UK data regulation is costing British tech businesses an estimated £5.3 billion a year in compliance costs alone. This includes time spent building systems and tools, training staff, and hiring data and legal advisers. Two-thirds (69%) of the 113 data-intensive technology businesses surveyed reported that compliance costs have risen over the past 5-10 years, while none say they have fallen, despite government attempts to reduce the burden in recent years.
Importantly, the survey found that compliance is only one slice of the ultimate cost to the British economy. Half (52%) of the technology businesses surveyed reported not undertaking a business activity due to data regulation, including avoiding a beneficial use because of uncertainty, scaling back analytics, not adopting new technology like AI and delaying products, features and services. Businesses are also diverting technical staff, changing product roadmaps, and holding back AI features because of uncertainty around data protection.
‘The issue is that business are very frightened of falling into the trap of breaching regulations, so they do not pursue a project because of the risk,’ explained one respondent. ‘Overzealous regulation means that taking that route is simply not worth the risk capital to get the feature up and running – better to place bets elsewhere,’ said another.
Businesses are not, for the most part, strict libertarians. Most agreed that some regulation should exist, but they doubt the current approach. A strong majority (62%) said that uncertainty about enforcement is a bigger problem than the rules themselves. Two-thirds (68%) said that the risk of getting it wrong is out of proportion to the actual risk to individuals.
Businesses also reported that if the rules were loosened, they could use data more extensively, adopt new data and AI tools, and launch faster in the UK. We received reports of products and features, including AI agents, being launched offshore because of data regulation.
So where to next? There is also strong support for lighter requirements for low risk uses of data, and an end to those repetitive cookie consent requests. But more than anything, businesses want much more clarity, including clearer, faster guidance and a more constructive approach from the regulator. The newly appointed independent board of the recently renamed Information Commissioner (still the ICO) now has an opportunity to shift culture, not just the letterhead.
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