UNDERSTANDING THE DIGITAL ECONOMY AND HOW DATA CENTRES FIT IN

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The digital economy is now the economy, with finance, healthcare, government, and industry all dependent on constant access to data, compute, and connectivity.

Data centres are the physical backbone that make this possible, powering cloud, AI, digital payments, and connected services at scale. As reliance grows, data centres have become critical economic assets that must deliver extreme reliability, security, scalability, and sustainability to support future growth.

Key insights:

• The digital economy now underpins almost all economic activity, with sectors such as finance, healthcare, manufacturing, and government relying on constant access to data, compute, and connectivity
• Key technologies including cloud computing, AI, IoT, big data, and digital payments are driving rapid growth, efficiency, and innovation, while also increasing reliance on resilient digital infrastructure
• Data centres form the physical backbone of the digital economy, enabling continuous operation of digital services and supporting massive growth in data volumes, capacity demand, and national economic value
• As dependence grows, data centres have become critical economic assets, requiring high standards of reliability, security, scalability, and sustainability to support future digital growth

Most people don’t think about the systems that sit behind everyday digital services. Online payments, cloud platforms, healthcare records, and public services are simply expected to work. It’s only when something fails that the scale of our dependence becomes obvious.

Over the last decade, digital technology has moved from a support function to core infrastructure. Entire sectors now rely on constant access to data, compute, and connectivity. Banking, healthcare, logistics, and government services no longer function without it.

This shift is what we mean by the digital economy. It includes any economic activity that depends on digital systems to operate - from financial transactions and supply chains to remote working and online public services. As reliance grows, so do expectations around reliability, security, and resilience.

This article answers the question “What is the digital economy?” and explores why it matters and the technologies driving its growth. It also looks at the role of data centres as the physical backbone that keeps digital services running safely, securely, and without interruption.

What is the digital economy?

So, what is the digital economy? Put simply, it covers any economic activity that depends on digital technology to operate. If a service needs the internet, data, or software to function, it sits within the digital economy.

Some organisations exist entirely online, such as cloud service providers and e-commerce businesses. Others are long-established industries that now rely on digital tools to function. Manufacturers use connected sensors to monitor equipment and predict failure, healthcare providers deliver consultations remotely, and financial institutions process vast volumes of digital payments, manage risk, and serve customers through digital platforms every day.

What links all of this activity is reliance on digital infrastructure. Without stable connectivity, secure data processing, and resilient platforms, these services cannot operate. When systems fail, the economic impact is immediate and often widespread.

In practical terms, the digital economy is today’s economy, built on data and connectivity. It enables faster communication, automated processes, real-time decision-making, and access to global markets that simply weren’t possible before.

What does digital economy mean in practice?

To understand what the digital economy really means, it helps to look at how it shows up in everyday life. For businesses, it’s no longer just about having a website - digital tools now shape how customers are reached, how work gets done, and how products and services are delivered. Online marketplaces, apps, digital advertising, and remote working platforms are all part of the picture.

For consumers, the digital economy is woven into daily routines. People bank online, stream content, shop, work remotely, and rely on connected devices as part of everyday life. Each interaction generates data that organisations use to improve services, tailor experiences, and develop new offerings.

What sets the digital economy apart is how quickly and widely it operates. Traditional limits such as location, opening hours, and physical distribution matter far less. A single digital service can support millions of users at the same time, run around the clock, and process transactions almost instantly.

That shift brings clear benefits, but it also introduces new risks. Digital platforms allow organisations to grow faster, operate more efficiently, and reach global markets with ease. At the same time, reliance on technology increases exposure to cyber threats, service outages, data loss, and regulatory pressure.

The result is a more fluid economy. Small businesses can operate globally without large physical footprints, and individuals can earn income through online platforms, remote work, or digital content. How work is done, and how economic value is created, has fundamentally changed.

Why is the digital economy important?

The digital economy drives growth, jobs, and innovation. By automating tasks, reducing costs, and enabling new business models, digital tools boost productivity across industries. Subscription services, platform marketplaces, and digital-first startups have created opportunities that didn’t exist a generation ago.

It also connects the world. Businesses of all sizes can reach international markets, collaborate across borders, and compete globally. Small and medium-sized enterprises now have access to customers far beyond their local regions, while organisations can experiment, adapt, and innovate faster than ever.

Jobs are changing too: demand is growing for roles in software development, data analysis, cybersecurity, and digital operations, reflecting the skills needed to thrive in a digitally-driven economy. Governments are also leveraging digital systems to improve public services, enhance transparency, and strengthen economic resilience.

Above all, the digital economy drives innovation. Digital tools speed up research, enable rapid prototyping, and deliver real-time feedback. Companies can test, refine, and improve new services quickly, creating a continuous cycle of improvement that pushes industries forward.

Key technologies driving the digital economy

The growth of the digital economy is driven by a range of interconnected technologies. Together, these technologies form the foundation of modern digital infrastructure.

Cloud computing

Cloud computing gives businesses access to storage, processing power, and applications over the internet. It reduces the need for costly physical infrastructure, allows rapid scaling, and supports flexible, data-driven services. 

Cloud services are essential for digital platforms, remote work, and data-driven applications, fundamentally reshaping how digital services are delivered and used.

Artificial intelligence (AI)

AI plays a major role in automating processes and analysing large volumes of data. From chatbots and recommendation engines to fraud detection and predictive analytics, AI is across the digital economy.

AI improves efficiency, speeds decision-making, and fuels innovation, while its high computational demands are reshaping data centre design - requiring specialised hardware, advanced cooling systems, and greater power density than traditional IT infrastructure can support.

Internet of Things (IoT)

The IoT connects physical devices to digital networks, generating real-time data from manufacturing equipment, vehicles, buildings, and consumer products. From smart factories and logistics tracking to healthcare monitoring and smart cities, IoT technologies generate real-time insights that improve efficiency and create new economic opportunities.

The rise of connected devices generates massive amounts of data that need to be processed, stored, and protected, putting growing pressure on digital infrastructure.

Big data and analytics

Data is one of the most valuable resources in the digital economy. Collecting and making sense of large datasets is now a key competitive advantage. Organisations rely on analytics to understand customers, optimise operations, spot opportunities, and make informed decisions. 

Delivering this insight requires infrastructure that can process complex queries at speed, handle diverse data types, and maintain security and integrity across the data lifecycle.

Blockchain and digital payments

Blockchain and digital payment systems are now at the heart of modern finance. They enable secure, transparent transactions without central intermediaries and support everything from cryptocurrency to supply chain tracking. Every day, billions of transactions flow through these systems, replacing physical cash and powering new financial services.

To work reliably, these technologies rely on resilient infrastructure. Systems must protect transaction integrity, withstand sophisticated cyber threats, and operate continuously to maintain trust in the digital financial ecosystem.

The role of data centres in the digital economy

Behind every digital service lies physical infrastructure, and data centres are at the heart of it. Data centres house servers, storage systems, and networking equipment, processing, sorting and distributing the data that powers digital applications and online services.

In the digital economy, data centres power everything from cloud computing, AI, streaming services, e-commerce platforms, and enterprise systems. Without them, digital platforms would grind to a halt. In the UK, these facilities are now classified as Critical National Infrastructure - reflecting their crucial importance to national security, economic stability, and essential services.

As data volumes continue to grow, demand for data centre capacity has increased significantly, with the UK sector valued at around $15.23 billion in 2025, and is forecast to grow to $28.45 billion by 2030. Industry and government projections indicate that this growth will continue beyond 2030 - with demand for UK data centre capacity expected to nearly double by 2031.

Why data centres are critical to the digital economy

Data centres are the backbone of the digital economy, providing the reliability, security, and scalability that modern services demand. Continuous uptime is essential - redundant power supplies, backup generators, resilient cooling, and diverse network connections ensure businesses and users can access digital platforms without interruption.

Security and compliance are equally critical. Physical access controls, network defences, encryption, and monitoring safeguard sensitive data, while adherence to regulatory standards protects both organisations and the wider economy.

Scalability and performance enable organisations to grow digital services rapidly, maintain low-latency connections, and deliver consistent performance across workloads. Data centres provide the capacity to handle increasing workloads, support emerging technologies such as AI, machine learning, IoT, and edge computing, and maintain low-latency, high-performance connections for responsive user experiences.

Sustainability is also a growing focus. Many data centres are designed for energy efficiency and integrate renewable energy sources, reducing environmental impact while meeting the ever-growing needs of the digital economy.

The future of the digital economy

As the digital economy grows, the infrastructure that supports it must keep pace. Data centres are no longer just technical facilities - they are critical economic assets powering the digital services society relies on. Organisations that invest in resilient, efficient, and future-ready infrastructure are better equipped to thrive in this digital landscape.

At RED, we design and deliver the data centre infrastructure that powers the digital economy - combining technical expertise with a whole-systems approach to create facilities that are resilient, efficient, and built for the future.

Contact RED today to discuss how we can help you build infrastructure that supports your digital economy ambitions.