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17 Mar 2023

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How the UK Compares to Its Neighbors and Peers

The UK's place in its region and the world was the topic of discussion at a recent IDCA Membership meeting, held in London prior to the DCW23 conference.The newly issued IDCA Smart Nations EESG Digital Readiness of Nations Index centered the discussion. The index examines 147 nations of the world in the areas of Digital Economy, Environment, Social structures, and Government effectiveness to derive an overall 0-100 score and relative ranking.

Nations scoring well in the ranking have shown significant progress in building their Digital Infrastructure. They also have the socioeconomic capacity and governmental stability to show continued progress, even as most of them face challenges in reducing their carbon footprints and related environmental issues.

Nations scoring less well may do so because of a lack of Digital Infrastructure, societal or governmental difficulties, difficult GHG-abatement challenges, or combinations of all these factors. Yet at the same time, these nations may offer great opportunities for rapid development. The Index is not meant to be a competition, but rather a conversation starter, and a way to find diamonds in the rough and other nations that stand out among their economic peers at all levels of wealth and development.

How the UK Looks in Comparison with Peers and Neighbors
With that preface, local audiences in London as well as observers around the world may be surprised to see the UK among the Top 25 nations in the ranking. As (still) the world's 5th-largest economy, and with London perpetually competing with New York City as the world's premier financial-services center, the UK continues to be one of the most consequential nations of the world.

The IDCA Membership meeting took in a comparison of the UK with its big EU economic peers, Germany, France, and the Netherlands, as well as the Nordic nations of Denmark, Sweden, Norway, and Finland. The Nordics combined would be a G20 nation, and all of the other nations listed here are among the world's top 20 largest economies.

Brexit's implications form the persistent, monstrous question hanging over any discussion of the UK today. A quick review shows that UK voters decided to leave the European Union (EU) in 2016, with 52% in favor this so-called Brexit. The formal rupture took place early in 2020. Brexit complicated the movement of goods between the UK and EU nations, with a particular complication involving the land border of Northern Ireland (part of the UK) and the Republic of Ireland (part of the EU). That situation appears to have been remedied very recently.

Long-term work visas also became a problem for non-UK citizens, especially in London, which attracts talent from around the EU and the world to its financial-services sector. The reality here, so far, is that about 7,000 jobs have moved ithis sector from the UK to the EU, compared to estimates as high as 75,000 in 2016. Anecdotally, this reporter knows of one high-level professional who left the UK for her home nation of Denmark to lead a sector of that nation's data center industry.

Specific Scores and Analysis
Conversations at the IDCA Membership meeting and with DCW23 attendees found some very hard opinions that Brexit was indeed a disaster for the UK, along with more moderate views. One person in particular who had been deeply involved with migrating government IT systems through the Brexit shoals expressed optimism in potential upsides to Brexit in the area of a newly independent ability to innovate and deliver services both domestically and internationally.

From the IDCA Smart Nations Research perspective, the data shows no effect to the positive or negative from Brexit so far. This holds true generally and with respect to its EU peers and neighbors. Within the four broad areas of the Index, the UK stands as follows:

* Digital Economy – the UK's score is 81 in this area (all scores on a 0-100) scale. The group's scores range from 74 in France to 90 in Denmark. Germany scores 84. The UK's overall internet speed is comparable with Germany and lags the Nordics slightly. Its mobility ecosystem is comparable with the Netherlands, and lags Germany and most of the Nordics slightly. Its server density – number of data center servers per million population – lags Germany and Denmark badly, and is comparable with France.

This is an area of opportunity for Digital Infrastructure investors and developers.

* Environment – This category heavily weighs the migration to renewable energy and working to reach the 1.5C Paris Agreement global warming goal. The UK's score in this category is 23. Scores among the nations examined here range from 9 in the Netherlands to to 53 in Denmark to 80 in Norway.

The UK's renewable energy footprint is comparable to that of Germany. Its percentage of renewable energy – about 28% – is half of that of most of the Nordics yet twice that of France and the Netherlands. France is hurt in this category as nuclear power is not counted as renewable power. The UK is also ahead of the United States, for what it's worth. Progress has been achieved, yet there is ample opportunity to expand renewable energy throughout the nation.

Thus, the glass is either half empty or half full for the UK in this category.

* Social – The areas of social structures and governmental effectiveness seem to be providing most of the angst for people who are leery of Brexit. Indeed, the UK has the lowest score amongst its peer in this category, with 68. Other scores range from France at 72, Germany at 75, the Netherlands at 84, to 83 through 90 among the Nordics.

Small differences in scores do not necessarily represent a significant statistical difference. However, there is a clear gap between the UK and its neighbors. That said, an orthodox economic view of “Anglo-Saxon capitalism” twins the UK with the United States rather than the rest of Western and Northern Europe. Viewed this way, the UK's score of 68 is significantly ahead of the US at 57.

Social programs lie at the crux of UK political debate and have for a long time.

The IDCA Smart Nations likely reflects, so far, the long-term debate over Anglo-Saxon capitalism rather than direct effects from Brexit.

* Government – This score centers around corruption in all its forms, from job-creation strategies to excessive government “fees” to overt bribery of and stealing by government officials. IDCA Smart Nations research has found a moderate direct correlation – but not a strong one – between overall corruption scores and foreign direct investment. It has found a stronger correlation between its Government score, development of a nation's Digital Economy, and long-term government stability.

The UK scores 83 in this category. Its peers and neighbors range from 74 in France to 86 in Germany, 88 in the Netherlands, and the 90s throughout the Nordics. From the Anglo-Saxon view, the UK's 83 compares favorably with the US score of 72.

This is another area in which political debate within the UK is intense and sometimes vitriolic.

The IDCA Smart Nations data shows no real decline so far in this area for the UK.

In Summary
The IDCA Smart Nations Digital Readiness of Nations Index shows the UK among the world's Top 25 nations. It is joined in this group by Germany, the Netherlands, and the Nordics. It is ahead of France. There is significant opportunity to build new renewable energy in the UK, given the nation's political and social will. There is a need – and thus, tremendous opportunity – for broadly increased data center infrastructure.

This will become more urgent as new demands imposed by increased visualization software and business metaverse creation continues to spike up the amounts of data being created, processed, networked, and stored. Data is increasing by 25% annually worldwide, representing a doubling every three years. If the UK is to remain among the world's economic and Digital Economy leaders, it must put in the requisite data centers to serve ever more data and the Digital Infrastructure that handles it.

There is wide-open political debate within the UK about its future, how to address environmental issues, and the footprint that increased Digital Infrastructure places upon its overall electricity grid.

The UK appears to be at an inflection point – whether it will carry on and perhaps intensify its commitment to remaining a global leader, or whether Brexit's implications will start to paralyze debate and consequent future progress.

Photograph by Roger Strukhoff at DCW23 in London.

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