United Kingdom IT Services Market - Growth, Trends, COVID-19 Impact, and Forecasts (2023 - 2028)

United Kingdom IT Services Market - Growth, Trends, COVID-19 Impact, and Forecasts (2023 - 2028)

The United Kingdom IT services market is expected to register a CAGR of 10.36% during the forecast period. The increasing use of internet applications and services, as well as the growing availability of wireless devices such as smartphones, other smart gadgets, and associated apps, are significantly driving the growth of the United Kingdom IT service market.

• There has been a significant investment in various IT solutions in the United Kingdom, with the overall adoption of software-as-a-service (SaaS) and increased cloud-based products demonstrating the rising industry's requirements for IT services. Digital transformation and automation are also trending in the region, fuelling the demand for IT services.
• Many prominent SaaS companies have ventured into the UK, where the market is expanding. SaaS growth is mainly fuelled by regional technology advancements, like adopting artificial intelligence and machine learning. The country's SaaS market is still maturing, offering investors a broad scope of opportunities to invest in IT solutions. For example, In March 2022, Amazon Web Services intended to invest more than £1.8 bn (USD 2.2 billion) over the next two years in building out its overall UK datacentre presence, as the demand for its public cloud services continues to increase significantly. During the intervening years, its presence in the UK has allowed AWS to secure many lucrative and high-profile deals with private sector organizations and central government departments in the financial, healthcare, and pharmaceutical services sectors.
• Moreover, the market is witnessing various mergers, partnerships, and acquisitions. For instance, in October 2022, Arqit Quantum Inc., a provider of quantum-safe encryption, signed a contract with Nine23 Ltd, a cyber security solutions provider primarily for the UK-compliant and regulated sectors, to deploy Arqit's QuantumCloud. It is mainly a symmetric key agreement software on Nine23's UK Sovereign Secure Private Cloud infrastructure, Platform FLEX, to deliver the highest level of assurance for its clients and customers.
• However, the rise in various data security-related issues and data breaching risks in the region could be a significant factor, restricting the overall market's growth throughout the forecast period.
• COVID-19 had a significant impact on the UK IT service industry sector. Working techniques of the companies changed to remote working scenarios for which demand for cloud computing services increased. Companies shipped computers to employees' homes and made them equipped with Wi-Fi adapters, power backup sources, and broadband connections when the IT companies began allowing employees to work from home. The virtual private network bandwidth was increased, and backend capacity was increased to meet the increased number of concurrently connected remote users. Virtual working was made possible because of cloud-based remote access solutions. Thus, the market initially faced challenges during the pandemic, but gradually COVID-19 had a good impact on IT services because of the increasing service needs.

• Domestic outsourcing is a technique in which the country's corporations prefer to outsource services to vendors within their own country. They primarily favor nearshore providers outsourcing overseas because of proximity, language, cultural commonalities, and minor time differences. For example, Infinity Group, a UK-based company, is one of the industry's leading IT outsourcing organizations, providing outsourced IT support to over 1000 businesses across the UK. The company works with clients, from fast-growing start-ups and SMEs to well-established larger corporations.
• Some key technology trends for nearshore IT services include a rise in the adoption of 5G Technology, IT Automation, Container Technology, Serverless computing, and virtual desktop infrastructure. In the coming years, 5G will be critical to the growth of the overall digital economy and society. The 5G technology has the full potential to impact practically every area of UK residents' lives, from personalized medicine to precision agriculture and smart energy grids to connected mobility.
• Moreover, the key corporates of the country are prioritizing domestic outsourcing of 5G services because it is critical to ensure the security of the EU's future 5G networks. For example, in May 2022, the Baltic telecommunications and media group and Ericsson signed a framework agreement to introduce 5G technology in the UK market. The deal would provide 5G network coverage in the most densely populated cities and districts, with plans to expand customer services in media entertainment and gaming, cloud, data centers, and the Internet of Things.
• The Bank of England estimates that 40-90 percent of bank workloads will be hosted on the public cloud or software-as-a-service in the coming ten years. It's crucial to examine the impact on business continuity if one of the suppliers fails. Hence, the financial authorities in the UK and around the world, notably the Bank of England, the Financial Conduct Authority (FCA), and the Prudential Regulation Authority (PRA), are keeping a close eye on this. This will create a growth opportunity for the UK IT service market.
• As per the technology Group, between 2020 and 2025, the SaaS (software as a service) sector is estimated to grow significantly in the United Kingdom. Moreover, the country is anticipated to experience a drastic increase, from 7500 million euros to 14,500 million euros in 2025. This rise in the overall share of the software as a service (SaaS) sector will create ample opportunities for the market to grow extensively throughout the forecast period.

• With a significant talent pool and high-service quality offerings, the United Kingdom is one of the most appealing IT outsourcing destinations. The overall fintech investment in the UK is rising significantly. These fintech companies have the requisite domain expertise and experience in designing various fintech solutions like digital banking, money transfers, personal financial management, risk and compliance management, peer-to-peer lending, and various other applications. For instance, in June 2022, SurePay, a European platform that provides online banking account verification services, teamed up with Virgin Money in the United Kingdom to launch its UK Confirmation of Payee solution.
• Moreover, Banking-as-a-Service (BaaS) is a crucial component of open banking. It involves banks opening their systems and allowing third parties to access their data in real-time to improve their services. The BaaS businesses within the country are disrupting retail banking business models, altering incumbents' client relationships, and making it easier for fintech companies to enter the market. With regulatory initiatives echoing worldwide, the UK is leading the open banking sector, driving the UK IT Service market. For instance, 11:FS Foundry, a UK-based SaaS/PaaS business, is working on a platform to provide fundamental banking features that mainly eliminate the need to choose between agility and scalability.
• In addition, Bankable is a London-based firm aiming to make it easier for traditional financial institutions and other businesses to launch innovative payment options. A virtual ledger manager, digital banking, payment card programs, and e-wallets are among the company's key BaaS offerings. Its end-to-end payment services are accessible through a unique interoperable platform that is PCI-DSS (Payment Card Industry – Data Security Standards) certified and hosted in Tier-4 data centers for increased security. Bankable also plays a significant role in assisting its partners in overcoming the technological and regulatory obstacles that arise while creating innovative financial services.
• Moreover, various key global MNCs are well-indulged in acquiring UK-based fintech companies. For instance, in March 2022, Apple purchased Credit Kudos, a fintech firm based in London. Credit Kudos is a software start-up that helps businesses improve their affordability and risk assessments by utilizing open banking. Lenders mainly use the software to expedite underwriting, increase decision-making accuracy, and improve customer service.
• As per the Bank of England, as of the 31st of May 2022, there was a total count of around 357 Monetary Financial Institutions operating in the United Kingdom, 130 of which were UK-headquartered. Monetary Financial Institutions (MFI) primarily include all the building societies and the banks that have permission to accept deposits in the United Kingdom. Hence, with the rise in the Monetary Financial Institutions (MFI) within the country, the overall demand for various IT services, especially in the banking sector, will rise significantly, expediting the overall market's growth exponentially.

The UK IT service market is extremely competitive, with only a few significant competitors. Some of the key players hold a major share of the market. Moreover, the variables are involved in various mergers and acquisitions and product innovation, among others, to gain a competitive edge over others.

In June 2022, Homerton Healthcare in the United Kingdom chose Sectra's business imaging as a cloud service to ensure patients have access to the most up-to-date technology. All the content and tools needed to organize, prioritize, and streamline imaging operations will be available in one application for the healthcare professional. Reading and reporting will be possible immediately within the Sectra solution, allowing for faster and more efficient diagnosis by removing the need for numerous programs. Also, in June 2022, The UK's Central Data and Digital Office (CDDO) released the Transforming for a Digital Future strategy, laying out a 2025 cross-government roadmap and vision. The plan highlights six primary purposes to improve and simplify citizen experiences, increase taxpayer value, and increase government efficiency and security.

In January 2022, Atos, an IT services company, filed a legal challenge against the Met Office and the Department for Business, Energy, and Industrial Strategy (BEIS) in the United Kingdom for over-allocating a significant IT contract to Microsoft last year.

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