UK’s Tech Strategy: Innovation and Security
Abigail Darwish & Aryamehr F | 21 May 2025
Summary
The UK Government is advancing semiconductor innovation through the establishment of a new electron-beam lithography facility and the introduction of a skills package to address workforce shortages in the sector.
At the same time, it is strengthening cyber resilience through the proposed Cyber Security and Resilience Bill by extending oversight to critical digital supply chains and enhancing the powers of national regulators.
Collectively, these measures are intended to reinforce the UK's technological capabilities and ensure the resilience of its digital infrastructure in the face of evolving security threats.
The United Kingdom (UK) government is pursuing a dual strategy to drive economic growth by combining cutting-edge technology innovation with strengthened cyber resilience. Key components of this approach include the development of a new electron-beam (“E-beam”) semiconductor lithography facility at the University of Southampton, aimed at advancing next-generation chip design. In parallel, the proposed Cyber Security and Resilience Bill seeks to overhaul existing cyber regulations, many of which were inherited from the European Union (EU), to better protect the UK’s critical digital infrastructure and services. Together, these initiatives are designed to foster high-value industries and safeguard the broader digital economy.
Innovation
On 30 April, the UK Government announced the opening of a semiconductor facility at the University of Southampton, poised to produce the ‘next generation’ of semiconductor chips. Central to this innovation is electron beam (e-beam) technology—a technique that uses a focused beam of electrons to draw highly precise nanoscale patterns directly onto a resist material, enabling the fabrication of advanced semiconductor components. The UK's semiconductor sector already contributes an estimated GBP 10b annually to the economy, with projections to reach GBP 17b by 2030, underscoring the industry's potential as a key driver of growth. For instance, an individual semiconductor worker can contribute almost half a million pounds to the economy annually.
Yet the scaling of this industry depends not only on infrastructure but also on the supply of skilled workers, which the UK currently faces a shortage of. To that end, the government has launched a GBP 4.75m ‘skills package’ to resolve the shortage of emerging talent. By funding bursaries, chip design programs, and school outreach initiatives, the package will bolster the UK’s Research and Development capacity. More broadly, such an initiative reflects a wider post-pandemic effort for countries to strengthen their semiconductor supply chains following recent disruptions. Notwithstanding the critical economic and strategic importance of semiconductors, the UK Government has proactively addressed the need for a comprehensive strategy to support the sector.
Cybersecurity and Resilience Legislation
As the technology sector accelerates, the UK is also modernising its cyber regulations to protect this growth from digital threats. The proposed Cyber Security and Resilience (CS&R) Bill represents a significant step in this direction, aiming to strengthen national preparedness and close regulatory gaps in digital infrastructure.
CS&R will expand the regulatory scope beyond the limited sectors covered under the 2018 Network and Information Systems (NIS) Regulations. In particular, it will extend oversight to key digital service supply chains, such as managed service providers (MSPs) and software vendors whose customers include critical national infrastructure. This is expected to bring under its scope around 900 to 1,100 managed service providers. Significantly, data centres will now be classified as critical national infrastructure, meaning that more companies managing IT services for others will be directly subject to cyber regulation. This is important as it will enable better coordination between the government and organisations whilst also creating more job opportunities.
To support this expansion, regulators, including the Information Commissioner’s Office (ICO), will gain new information-gathering powers. Companies will have a legal obligation to register their digital services with the ICO and share relevant information. The ICO will also be able to issue information notices more broadly, and non-compliance will be enforceable. This proactive stance will allow regulators to map and monitor systemic risk rather than relying solely on incident reporting. Such measures are therefore likely to impact data protection, encryption and user privacy. Additionally, for the first time, the Secretary of State could mandate that a regulated entity take specific actions in response to a cyber threat or incident, if deemed necessary for national security.
The expanded regime will coexist alongside the UK GDPR and Data Protection Act (enforced by the ICO). In most cases, the Bill reinforces the security obligations already implicit under data protection. However, there is potential friction. For instance, rapid incident reporting could involve sharing breach details, possibly containing personal data, with regulators and even public bodies. Likewise, any requirement for network monitoring or security audits must be done with care to respect individuals’ privacy rights. The government’s proposals do not override data protection law, so companies will have to manage dual compliance regimes. It will therefore be essential for regulators to provide clear guidance on handling personal data in cyber incident reports to avoid inadvertent privacy breaches.
This legislative push follows recognition that the existing NIS Regulations, adopted from EU law in 2018, are no longer sufficient. Whilst they once helped safeguard essential services, they are now seen as too narrow in scope. Industry and government actors alike argue that the UK lags behind updated EU standards, such as NIS2, which imposes much broader coverage and stricter compliance obligations. The CS&R Bill is therefore designed to modernise the UK’s cyber regulatory framework, ensuring it reflects current threat realities and international benchmarks.
Microsoft Designer
Forecast
Short-term (Now - 3 months)
It is unlikely that the new e-beam facility will achieve full operational capacity or produce chips yet whilst in the early stages of operational scaling and workforce recruitment.
It is likely that the Cyber Security and Resilience Bill will incentivise companies, particularly larger enterprises, to enhance their preparedness, for instance by investing in cybersecurity talent and implementing robust resilience measures.
Medium-term (3-12 months)
It is likely that the semiconductor facility will establish research partnerships with academic institutions and private-sector actors, enhancing the UK’s domestic semiconductor ecosystem.
It is likely that, following the Bill, many UK organisations will have to adapt, potentially upgrading technical defences and carrying out more risk assessments.
There is a realistic possibility that friction will emerge around data-sharing requirements, particularly where rapid incident reporting involves disclosing personal data.
Long-term (>1 year)
The UK semiconductor industry will likely see accelerated growth in economic contribution, approaching projected targets of GBP 17b by 2030, contingent on sustained investment in infrastructure and skills.
It is unlikely that the UK will be able to maintain a competitive position in the global semiconductor sector without active international cooperation. However, subject to the success of the institute, there may be scope for such cooperation.
It is highly likely that through the Bill, UK businesses will considerably benefit by aligning UK cybersecurity rules with EU standards, reducing trade barriers for digital and technology services.
It is likely that the Bill will raise the baseline cyber standards across critical industries, with regulated sectors facing more rigorous supervision (including audits and investigations) and potentially larger fines for non‑compliance, improving overall resilience over time.
