UK Risks Falling Behind in Global Digital Transformation Race
Investment Lag Threatens Decarbonisation and Productivity Goals
The UK faces a significant threat to its competitiveness and ability to achieve net-zero targets if businesses don’t significantly increase investment in digital technologies. This warning comes amidst a new study which reveals that British companies are significantly lagging behind their global counterparts in planned spending for digital transformation.
The research, conducted by Siemens and exploring the views of 650 senior executives from 13 countries, found that only 38% of UK businesses are likely to increase investment in digital technologies in the coming year. This starkly contrasts with the global average of 58% and places the UK far behind other leading economies: Canada (72%), China (70%), Italy (64%), and Germany (54%).
The study underscores the potential economic consequences of this under-investment, highlighting that digitalisation is critical for modernising infrastructure, boosting productivity, and driving decarbonisation efforts.
"Digitalisation is the number one driver in creating a modern, decarbonised UK infrastructure," said Carl Ennis, Chief Executive of Siemens UK&I. "From electricity, water, buildings, transport – the list goes on – technologies like AI, simulation and automation are increasingly playing a role in helping to optimise assets and transition to net zero."
Despite recognizing the benefits of digitalisation — including increased productivity (68%), improvements to workforce health and safety (66%), and advancements in decarbonisation (64%) — UK firms remain hesitant.
Barriers to Adoption and the Need for Government Support
The Siemens study identified the perceived costs of implementation (46%) and complexity of integration (38%) as leading obstacles to the adoption of digital platforms. Only Mexican businesses were more acutely influenced by cost concerns.
Recognizing the urgency, Siemens has called for the UK government to take decisive steps to encourage investment and accelerate digital transformation. Key recommendations include:
- Targets for Digital Adoption:
Setting clear targets for increasing digital adoption in crucial sectors like advanced manufacturing and clean energy technologies.
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Tax Incentives for Investment:
Extending 100% first-year capital allowances (Full Expensing) to leased assets, making digital technology investments more accessible.
- Early-Stage Funding and Support:
Offering more attractive early-stage funding and support specifically tailored for businesses venturing into sustainability and digital technologies.
- Upskilling and Reskilling Initiatives:
- Introducing measures, such as tax credits, to support the reskilling and upskilling of existing workers – a crucial element in enabling wider digital adoption.
The Climate Change Committee has also emphasized the need for faster progress in decarbonising infrastructure and industry to meet the UK’s 2050 Net Zero targets.
Carl Ennis stressed the need for a long-term vision from the government: “It is concerning to see the UK trailing behind its global competitors when it comes to planned investment to modernise infrastructure, but perhaps unsurprising given long-term uncertainty in the UK in recent years."
"The upcoming industrial strategy must create a long-term, stable policy environment that businesses need to invest,” he added. "This presents an exciting opportunity for British firms to close the gap. The research reiterates the need for this to be accompanied by specific regulatory frameworks and policies to drive down the cost of investing in digital infrastructure, and ultimately allow businesses to deploy it at scale. Culturally, we also now need to be steadfast in our approach to technology. Either we learn to overcome these barriers and adopt it at pace, or we put productivity, decarbonisation and the UK’s growth at risk.”
What are the potential consequences for the UK if businesses continue to lag behind global counterparts in adopting digital technologies?
## Falling Behind in the Digital Race: A Conversation with Carl Ennis
**Host:** Welcome back to the show. Today we’re discussing a concerning new study highlighting the UK’s lagging investment in digital transformation. Joining me is Carl Ennis, Chief Executive of Siemens UK&I, who has been calling for urgent action on this issue. Carl, thank you for being here.
**Ennis:** It’s a pleasure to be here.
**Host:** The study paints a stark picture. Only 38% of UK businesses plan to increase investment in digital technologies this year, compared to a global average of 58%. What are your thoughts on these findings and what are the potential consequences for the UK?
**Ennis:** These figures are concerning, to say the least. They show that UK businesses are falling significantly behind their global counterparts in adopting the digital technologies that are critical for future economic growth and competitiveness. This lack of investment threatens not only our productivity goals but also our ability to achieve net-zero targets. [[1](https://www.statista.com/topics/7208/digital-economy-in-the-uk/)] highlights the immense potential of the UK’s digital sector, but without sustained investment, we risk squandering this opportunity.
**Host:** The study mentions digitalisation being crucial for modernising infrastructure and driving decarbonisation. Can you elaborate on this point?
**Ennis:** Absolutely. From optimising energy grids to facilitating the transition to electric vehicles, technologies like AI, automation, and simulation are essential tools in building the sustainable infrastructure of the future. But without the necessary investment in these technologies, we risk falling behind in the race to net-zero and securing a prosperous and sustainable future for the UK.
**Host:** The study also cites cost and complexity as significant barriers to adoption. What can be done to address these challenges and encourage greater investment?
**Ennis:** Siemens believes the government has a crucial role to play in creating a more supportive environment for digital transformation. We’re calling for clear targets for digital adoption in key sectors, coupled with tax incentives to encourage investment. We need a coordinated national strategy that removes barriers to adoption and empowers businesses to embrace the benefits of digitalization.
**Host:** Carl Ennis, thank you for sharing your insights on this critical issue. It’s clear that the UK faces a pivotal moment in its digital journey. We need decisive action to ensure we don’t fall behind and unleash the full potential of the digital economy.
