UK Law and Practice Contributed by: Richard Brown, Louisa Chambers, Adam Wyman and Michael Ross, Travers Smith LLP
2. Regulatory Environment 2.1 Restrictions on Technology Transactions or Outsourcing Although the UK regulates the employment aspects of most outsourcing and M&A transactions (see 5. Employment Matters ), it does not have any other overarching legislation that seeks to regulate out - sourcing transactions on a non-sector-specific basis. That being said: • businesses should be mindful of regulations specific to their industry sector that might have an impact on the outsourced service and the way it is carried out, service levels and other contractual obligations (see 2.2 Industry-Specific Restric - tions ); • public sector outsourcings can be subject to rules on public procurement and new UK legislation in the form of the Procurement Act 2023 came into force on 24 February 2025 (see 2.2 Industry-Spe- cific Restrictions ); • certain outsourcing arrangements may be subject to EU or UK merger control legislation – although this is relatively rare in practice; and • outsourcings involving data – especially personal data – are subject to regulation in the UK (see 2.3 Restrictions on Data Processing or Data Secu- rity ). As noted in a number of cases below, the new Labour government and the UK’s departure from the EU could lead to changes in regulation, given that the UK may decide to diverge from the EU in some areas. In the majority of cases, this is expected to be an evolu - tionary process that will take time to implement, as it requires consultation with industry and the passing of new legislation. 2.2 Industry-Specific Restrictions Financial Services Outsourcing transactions relating to financial services are subject to sector-specific regulation, as outlined here. Regulatory authorities The majority of financial services firms in the UK are regulated by the Financial Conduct Authority (FCA).
ness processes and operational efficiency through automated hiring processes, training, and data analy - sis. Organisations are also increasingly utilising out - sourced service providers for dealing with customer queries through AI chatbots, which can provide 24/7 customer service for simpler queries and thereby free up time for customer service representatives to focus on the more complex queries. The use of blockchain technology will continue to rise throughout 2025 and 2026, driving a requirement for professional expertise in the implementation and operation of such solutions, meaning that many busi - nesses will increasingly look externally for such sup - port in the form of IT outsourcing, according to Van - guard X. This is of particular relevance in the financial services sector (see 2.2 Industry-Specific Restric - tions ) given the introduction of general operational resilience rules for UK financial services firms and the FCA’s anticipated development of new, sector-specif - ic outsourcing rules for UK stablecoin issuers. The rapidly changing regulatory landscape will con - tinue to encourage businesses to turn to specialised outsourced service providers for support in navigat - ing and mitigating the regulatory risks associated with such new technologies. 1.4 Outsourced Services The most commonly outsourced services in the UK are IT services, as discussed in more detail at 1.1 IT Outsourcing . Other common outsourced services include payroll services, which can include pay and tax calculations, interfacing with HMRC (including fil - ing and paying taxes) and keeping payroll records, as well as HR support. Customer relationship manage - ment is another popular service to outsource in the UK, including the use of call centres and the outsourc - ing of complaints handling and claims processing. UK organisations also frequently outsource aspects of their supply chains such as warehousing, logistics and delivery services. Facilities management, printing and accounting are also commonly outsourced in the UK.
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