As we come up to Christmas and the end of 2025, here is my brief look at highlights, lowlights, and our thoughts on 2026 and what happens next.
According to the Tech Nation 2025 report, the UK tech ecosystem and digital economy is now valued at around 1.2 trillion US dollars, making it the largest in Europe and more than double the combined value of France and Germany. London accounts for almost 60 percent of that value.
Our UK government has established a comprehensive national strategy for technology and AI, primarily driven by the Department for Science, Innovation and Technology (DSIT), focusing on economic growth, public service transformation, and safety. We hope they can execute on their plans and promises.
What’s the backdrop? We all know we are living through a new tech era. ChatGPT was launched in November 2022, and so here we are 3 years in, and surprisingly to me we are only just coming our of the experimentation phase and going operational with real ROI from AI. It’s taking longer than I expected, but the potential is significant.
Research shows over 50% of companies are increasing their investment in AI and automation and the key targets are automating complexity, and accelerating decision-making.
We’ve also seen the downside of AI too, as the bad actors can use the same AI tools to get more sophisticated in their attacks. We’ve seen major companies like M&S, Jaguar Land Rover, some NHS Trusts, and the Coop all being hit massively. It’s down to all of us. Every company has to do a proper risk assessment, and understand their vulnerabilities so they can put things in place to grow their business whilst protecting their reputation, their brand, and their customers.
We are just coming out of a period of uncertainty around employers paying more national insurance, and what extra taxes would or wouldn’t be in the recent budget. That has lead to poor jobs numbers, but the likes of ManpowerGroup suggest a positive shift in UK hiring intentions for Q1 2026, signalling increased demand for workers. They are talking about more opportunities in Digital, Adult Social Care, Housebuilding, and Engineering.
We definitely need properly trained people in new jobs, but we all need to upskill our existing staff significantly too – the World Economic Forum puts it at 59 percent of the workforce.
For me tech themes that will shape business in 2026 and beyond are AI, cloud infrastructure, and the way that tech changing future of work. That should guide you on where to invest in R&D.
What about major tech giants—Microsoft, Google (Alphabet), Amazon, Meta, and Apple—are currently engaged in an unprecedented spending race. Collectively they’re projected to have spent over $400 billion this year on AI infstructure , and have announced $600 billion more next year. That’s why there’s been talk of an AI bubble, but I don’t see that bubble bursting. There may well be some corrections, but I’m optimistic – I believe we’ve learned from the dotcom era.
You can find the replay of our most recent Transformation In Action webinar on our new streaming platform. It’s a discussion of the imperatives for 2026. I asked our three speakers what excited them most about the next year in tech?
Emma Dennard of OVHcloud talked about the digital sovereignty opportunity. She worried that the UK are sitting on the fence, but in the EU counties, and particularly the Nordics it’s key issue and so a differentiator for them.
Paul Bevan, who is one of our STARs, our strategy, advisory, and research council, was keen to see the reality of the growth in new data centres. He wants to see spades breaking ground. There is no doubt that the 2026 demand for AI capacity in the data centre will exceed the our capability and time to market for the physical infrastructure we need. It’s a challenge.
Finbarr Joy, CTO advisor to Superbet and others believes we’re in a state of flux, and it genuinely feels like 1999 again. He recognised that could mean boom or bust like the dotcom era, but he’s optimistic, and believes the successive waves of new initiatives have made people more engineering driven, and that’s a good thing.
In one of our interview shows I spoke with Robert Whiteside of EmpowerRD talking about their recent research on UK innovation. He was excited that the entrepreneurial spirit of the UK shone through with great energy and spirit. He believes, and I agree with him, that the biggest opportunity for tech in the UK is the application layer – we may be able to innovate in chips, we may be able to innovate in data, but that’s going up against the big companies and hyperscalers we mentioned earlier. But as an industry, we can compete on software. 2 guys or gals with an idea can still start in a shed and build something huge, and tools like AI will help them grow faster.
And I’ll finish on a recent AWS Software Company Competitiveness Index report where I was asked to write the foreword. One of the findings was that cloud adopters compared to cloud experimenters were more likely to be growing, and that cloud-first companies are two times more likely to exceed expectations on valuations.
So my 3 messages for 2026 are:
- Upskilling your team is essential
- The application layer is our UK tech sector’s opportunity
- And cloud infrastructure, and cloud native are both good for business and company value.
Tech Industry Forum and I wish you seasons greetings, and all the best for a fantastic 2026!
by David Terrar, CEO Tech Industry Forum
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