Tech companies reconsider market strategy following increasing regulatory demands, survey finds

Fieldfisher survey highlights the technology sector's growing compliance challenges

Fieldfisher's Technology Regulation survey has revealed that businesses in the tech sector are facing a rising tide of regulation with a number being putting off entry into new jurisdictions due to regulatory pressures.

The Technology Regulation team issued a survey to over 1700 UK and international technology businesses to find out how GCs and in house legal teams are managing the growing technology regulation in Europe. The organisations that participated were headquartered equally across the UK, EU and USA, and the majority were organisations of 500 people or more.

The results revealed a majority of respondents felt they had no or limited resources to manage regulatory change and were not expecting to see increases in compliance budgets to address this.

Key findings include:

• Only 5% of respondents said they had a very good understanding of forthcoming changes EU and UK tech regulation.

Only a limited number of respondents were closely monitoring developments and budget pressures meant the majority were not expecting to see increases in spending on compliance. This is significant because both EU and UK regulators have signalled their intention to crack down on compliance with legislation covering areas such as cyber, AI and online safety, potentially issuing substantial fines alongside other punitive enforcement action.

• One in five could put off entering a country due to regulatory risk

Around 20% of those who responded to the survey said UK and EU technology regulation could have an impact on their strategy in the UK and/or EU and which countries they might enter. Divergent approaches are emerging between the UK and EU on things like platform liability. In addition, despite the harmonisation efforts of the EU, we're still seeing additional local country requirements in certain areas of digital regulation.

• Businesses still prioritising cyber and data security over more recent legislation

The survey revealed that by far the biggest regulatory priority for in-house counsel in terms of technology was data and cyber security. This will need to shift, with major new pieces of regulation covering new areas like online safety and artificial intelligence carrying strict penalties for non-compliance.

The full survey results are available here.

Regulation can create opportunities for some

The trend towards more digital regulation is set to continue, particularly in areas such as AI, cyber security and online safety. Businesses that fail to take necessary steps to manage the compliance risks can result in fines, business disruption, damage to business reputation and more.

Opportunities can arise, however. Governments, such as the UK, have identified the need to support and invest in the emerging safety-tech sector and funding is being made available to help safety tech start-ups to scale their work. Solution providers can develop tools that speed up compliance and organisations can differentiate themselves from their competitors by picking up these tools. Compliant businesses are more likely to be seen as trusted brands. In the long run, this kind of activity can instil user and investor confidence, driving value in the business.

About Fieldfisher's Technology Regulation Hub

Fieldfisher's market-leading technology and regulatory teams help companies prepare for and navigate European technology regulation. 

The Technology Regulation hub brings together key insights from our experts to help businesses understand and address the complex and evolving landscape of technology regulation.  

The team produces a quarterly newsletter providing an overview of key regulatory developments in the UK and EU across the topics of online safety, digital services and digital content. We would encourage you and your contacts to sign up to stay ahead.