The world risks fragmenting into regional and national ‘splinternets’ unless governments can agree on a shared approach to data regulation and cross-border data transfers.

Digital trade has become ever more important over the last decade, with 86% of UK financial services exports, equivalent to over £53bn in 2020, being delivered digitally.

However, TheCityUK research found that such digital trade is becoming more difficult, with barriers doubling between 2009-2019, and restrictions on international data transfers more than doubling since 2017.

In the Digital trade: a commercially viable approach report, a series of recommendations for how the UK can strengthen its position as a global centre for data are suggested, and what actions it can take to address the growing tide of protectionism surrounding cross-border data transfers and processing.

Doing so would ultimately see the UK benefit from greater innovation, a wider choice of digital services and more high-skilled jobs and sustainable development.

Nicola Watkinson, Managing Director, International Trade and Investment, TheCityUK, said: “In a highly digitised world, digital supply chains are just as crucial as physical ones, and we must treat any fragmentation just as seriously.

“Digital trade is vital to the operation of all aspects of financial and related professional services, just as it is to many of the service-based industries on which the British economy relies. It is, therefore, essential for the UK to strive to prevent further moves toward international digital protectionism to champion an open approach, refine its data policies, and agree on new bilateral and multilateral partnerships. Britain must also continue to seek more digital trade deals and build a broader global consensus toward the trusted free flow of data.

“Our industry is ready to work alongside government to help progress digital trade agreements and ensure the UK continues to be globally recognised as a safe reliable and attractive hub for data-driven businesses. A good start has been made but there is more to be done to genuinely make the UK the stand out global leader in this area.”

Recommended

• NFT art offers new avenues for creativity – And cash
• South Staffordshire Water cyber-attack: What you need to know
• Apple plots advertising expansion for native apps

While there are limits to what the UK can achieve on its own to combat digital protectionism, the report noted three levels of recommendations on which UK policymakers should seek to act.

These recommendations include strengthening the UK as a global data hub, seeking bilateral deals with trade partners to ease data flows, and striving to build global cooperation and consensus.

Financial and related professional services firms need to move, store, access, and process data across borders for a wide number of reasons, the report noted.

All these commercial and operational objectives are becoming increasingly difficult, costly, or complex to attain because of recent data localisation rules and new proposed localisation requirements around the world.

Get the latest news from DIGIT direct to your inbox

Our newsletter covers the latest technology and IT news from Scotland and beyond, as well as in-depth features and exclusive interviews with leading figures and rising stars.

To subscribe, click here.