The UK trade deal with the United States influences a $300 billion relationship that creates big chances for tech companies in both countries. Small and medium-sized businesses make up 90% of US exporters to the UK, adding $20.3 billion in goods. This deal opens a new path to share tech breakthroughs between the only two Western countries with tech sectors worth over a trillion dollars.
Our research reveals that the US-UK trade deal acts as a launchpad to form technology partnerships for tech SMEs aiming to grow overseas. After Brexit, UK trade agreements have changed to acknowledge digital-first companies, while the US-UK trade pact opens up ways to work together in advanced areas like AI and quantum tech. Additionally, the UK acts as a gateway to the European Union for over 41,000 US exporters, highlighting its crucial importance.
This guide looks at how the new digital trade rules impact tech SMEs, checks out changes in the US market, tackles issues like the UK Digital Services Tax, and lays out what’s coming in the next round of talks. Since the US-UK investment ties are still the biggest worldwide at over $1 trillion, knowing how to handle this scene is key for tech companies looking to cash in on cross-border chances.
New Digital Trade Rules in the US-UK Deal
The UK and US have just announced a new trade deal that focuses on digital business. This agreement sets up rules for online trade, showing how tech is becoming more crucial in how these countries do business. Both countries say they’ll work on creating some significant changes in digital trade rules, which points to a more modern way of trading in today’s tech-driven world.
Making It Easier to Sell Digital Services Abroad
The new deal between the two countries will set up rules to make it easier to export digital services. They’re focusing on paperless trade processing before arrival and digital methods to help goods move more between the nations. This digital approach aims to get rid of red tape that’s making it hard for UK companies to export across the Atlantic. Government officials say these new rules could boost the economy by cutting down on paperwork, which is tough for small and medium-sized tech firms.
Trade Language Recognizes Digital-First Businesses
For the first time, the trade language recognises digital-first business models, granting much-needed acknowledgement to tech companies that operate in the digital world. Furthermore, the agreement indicates that financial services will be part of the new digital trade rules. This inclusion marks a big step forward for fintech companies and other businesses working where technology meets financial services, creating clearer paths for operations across borders.
Cross-border Data Flow Commitments: Still Pending
While both countries have agreed in theory to make the free flow of personal data easier through a “data bridge,” this is still in the works. In 2021, the UK sent more than £79 billion worth of data-enabled services to the US, which constituted about 30% of all the UK’s data-enabled service exports. Right now most UK companies have to use expensive contract clauses when they send personal data to the US, which creates a lot of paperwork.
The planned data bridge would get rid of these problems. However, several steps must be completed before the data bridge can become operational:
- The UK needs to finish its review process
- The US needs to name the UK as a qualifying state under Executive Order 14086
- More technical talks need to take place
It’s important to note that the EU-US Data Privacy Framework appears to be planning to include the data bridge. This suggests a unified approach to data flows across the Atlantic.
Chances for UK Tech SMEs in the US Market
“Even with less than ideal lead time, we want to work with you all.” GEODIS, a global logistics company
Keir Starmer, the Prime Minister, described the UK-US trade deal as a “springboard for a technology partnership,” highlighting the big opportunities UK tech SMEs have in the American market. Both countries have tech sectors worth over $1 trillion, opening up giant potential for smaller companies to grow, get investment, and work together.
AI and Quantum Tech Teamwork Plan
The UK and US signed a statement to work together on quantum science and tech, setting clear goals for cooperation. This plan includes:
- Teaming up on research and building a global market
- Swapping staff and students between the National Physical Laboratory and National Institute of Standards and Technology
- Industry connections through UK-US business meetings to bring together companies.
This quantum partnership has significant funding behind it, including £1 billion through the National Quantum Technologies Program and another £50 million from Innovate UK for 12 projects to commercialise research. These investments support new ideas like quantum computing systems to speed up drug discovery.
Turning Academic Research into Commercial Products
The UK has focused on academic publications instead of patents, but the new trade agreement creates better ways to turn research into commercial products. The Lambert Review spotted a key problem: UK businesses didn’t ask for university technologies enough. The agreement tackles this issue by connecting companies across the Atlantic.
It’s worth mentioning that groups of tech companies near Oxford and Cambridge show how university research can boost the economy when it turns into business ideas. For example, Oxfordshire alone has 1,400 companies that employ 37,000 people.
UK Tech Companies Can Now Use US Innovation Centers
Small and medium-sized UK tech businesses now have better access to American innovation networks. One example is the ABHI Innovation Hub at Dell Medical School, University of Texas. This setup gives British firms a foothold in Texas. It links them to doctors, hospitals, investors, and important business groups.
What’s more, the Partnership Opportunity Delegation to London spotted over 30 potential teamwork chances in AI, quantum technology, and synthetic biology. These include investment options, setting up US tech operations in the UK, joint R&D, and shared investment deals.
Challenges Not Addressed in the Current Deal
“Under the current terms, reciprocal tariffs between the two countries will remain at 10% for most goods.” GEODIS, a global logistics company
Even with notable wins in the UK-US trade deal, several key issues remain unsolved, creating doubt for tech businesses working across borders.
Digital Services Tax (DST) Stays and Its Effect
One significant issue that remains unchanged in the current agreement is the UK Digital Services Tax. This 2% charge hits search engines, social media sites, and online marketplaces that make over £500 million worldwide and at least £25 million from UK customers. It affects big US tech companies like Google, Meta, and Amazon and should bring in about £800m this year. Currently, the Trump team perceives these taxes as an attempt to exploit American companies, with White House trade adviser Peter Navarro describing their spread as “disastrous.” This unresolved problem keeps causing tension in tech relations across the Atlantic, leaving businesses unsure about their tax situation.
Lack of Clarity in Data Privacy and Compliance
Unlike the EU’s all-encompassing GDPR, the US splits its data rules, making it tough to obey the law. UK firms must deal with both sets of rules, looking at differences and coming up with plans to follow both. The UK-US Data Bridge Agreement makes people worry about how it might affect the UK’s GDPR adequacy decision. It also raises questions about what will happen if the EU cancels its US adequacy decision. UK companies have already put GDPR into practice, so the main question is how US rules will work with current systems without causing expensive or privacy-harming clashes.
No Provisions to Align Platform Regulation
The agreement doesn’t create a path to align platform rules, so tech firms must deal with scattered global regulations. Currently, online regulatory approaches vary significantly, ranging from Canada’s minimal oversight to Belarus’s stricter social order protections. Instead of unified standards, the UK’s Online Safety Act and related laws create a regulatory mix that makes it harder for tech SMEs to comply. We run the risk of creating a “jurisdictionally fragmented Internet,” where open national networks develop around regional platforms and cultures, if we don’t advocate for new global governance practices.
Preparing for the Next Phase of the UK-US Tech Partnership
The UK and US are still ironing out the details of their announced trade deal, with key parts still up for debate. As the official announcement states, this includes “finalising provisions on digital trade, intellectual property, labour, environments, and standards, including automotive standards.”
Expected Timeline for Digital Trade Chapter Negotiations
The current framework sets basic guidelines for digital trade, with major talks yet to come. There’s no clear timeline for wrapping up these provisions, leaving businesses in the dark about their international growth plans. So far, the two countries have agreed to talk about “an ambitious set of digital trade provisions” that would cover financial services.
Among unsettled matters, the Digital Services Tax (DST) remains a major point of disagreement. The United States has expressed its frustration that “the UK was unwilling to agree to address its discriminatory Digital Services Tax,” labelling it “unjustified” and calling for its swift elimination. This tax dispute will have an impact on the speed and atmosphere of future talks.
SME Dialog’s Part in Molding Future Deals
The ongoing SME Dialogue series acts as a key platform for small businesses to shape trade policy. The United States and the UK held the 9th U.S.-UK Small- and Medium-Sized (SME) Dialogue in Charlotte, North Carolina, after the 8th Dialogue took place in Belfast in April 2024.
These structured talks hold particular significance given that about 90% of U.S. companies exporting to the UK are small and medium-sized businesses. Over 26,000 small firms across all fifty states export $20.30 billion worth of goods to the United Kingdom.
During these conversations, people talk about
- Trade interests and obstacles between the U.S. and UK
- How SMEs can turn innovative tech into commercial products
- Ways small businesses can bounce back after disasters
- How SMEs and startups can fund their exports
After these talks, the ideas shared shape what negotiators focus on. So, tech SMEs should jump into these discussions to make sure their issues get the attention they deserve in upcoming trade deals.
Overall, the trade relationship between the two countries totals more than $300 billion, with $1.70 trillion invested in each other’s economies. This situation highlights how crucial it is to get these digital provisions correct.
Conclusion
The landmark UK-US trade agreement signals a shift for tech SMEs looking to expand across the Atlantic. In this guide, we’ve examined how this $300 billion relationship creates new opportunities for technology companies while also acknowledging several unresolved issues.
To start with, the deal’s emphasis on recognising digital-first businesses shows a big change in how new trade agreements treat tech companies. Smaller tech firms previously hindered by red tape now have opportunities thanks to this recognition and simplified export procedures. Furthermore, the promise to discuss far-reaching digital trade rules indicates that both countries understand the importance of technology for future economic growth.
Plans for collaborating on quantum tech and AI stand out as transformative opportunities for innovative UK tech SMEs. With big money from programmes like the £1 billion National Quantum Technologies Program, tech companies now have clearer ways to turn university research into real products and join lively American innovation scenes.
Despite progress, big challenges remain. The controversial Digital Services Tax stays the same, causing ongoing friction between the countries. Furthermore, the different rules for data privacy and platform control across borders still make it challenging for companies to obey the law. These unsolved problems will affect future talks.
Tech SMEs looking to grow need to watch how this trade relationship changes. The SME Dialogue meetings give a chance to shape policy. Since small and medium businesses constitute 90% of US companies that sell to the UK and generate over $20 billion in goods, their opinions are critical in shaping future regulations.
Two trillion-dollar tech sectors have laid the foundation for a transformative tech alliance. This deal, while still in its early stages, marks a crucial step toward a more connected transatlantic digital market. Tech SMEs that fully embrace the opportunities and limitations of this expanding framework will stand to benefit from its advantages while navigating its challenges.
FAQs
Q1. How does the UK-US trade agreement help tech SMEs?
The agreement recognises the ease with which digital-first companies can export digital services and provides opportunities for collaboration in AI and quantum technologies. It also provides UK tech SMEs better access to US innovation centres and startup incubators.
Q2. How does the agreement address cross-border data flows?
The agreement commits both countries to the free movement of personal data through a “data bridge,” but this part is still in progress. The planned data bridge aims to remove the need for expensive contract clauses now required to send personal data to the US.
Q3. What opportunities does the deal create for AI and quantum tech collaboration?
The deal sets up a structure to conduct joint research, exchange staff and students, and organise UK and US business meetings in quantum science and technology. It has strong financial support, including £1 billion through the National Quantum Technologies Programme.
Q4. What challenges remain unaddressed in the current trade deal?
The UK Digital Services Tax stays the same, which keeps causing friction. Furthermore, the deal doesn’t make data privacy rules clear and doesn’t line up with platform regulations. The result could make things tricky for tech firms working in both countries.
Q5. How can tech SMEs influence future trade negotiations?
Tech SMEs can join the ongoing SME Dialogue series. The initiative provides small businesses a chance to shape trade policy. These talks cover trade interests, obstacles, and plans. The insights from these talks help set priorities for future deals.