Why Data Sovereignty Can Make or Break SMEs

For small and medium-sized enterprises (SMEs) across the UK, data sovereignty has become a boardroom priority that needs immediate attention. Where data resides and how it is governed is becoming more tied to customer trust, competitiveness, and the ability to maintain operational stability and business performance over the long term.

team.blue recently conducted research, conducted in partnership with names.co.uk and Hosting Ireland, that revealed 61 per cent of UK SMEs and 45 per cent of Irish SMEs are increasingly concerned about where their data is stored. While awareness is rising, many SMEs still lack the tools or knowledge to change how their data is stored and what this means for their business.

Understanding the Divide between the UK and Ireland

In the UK, the discussion around sovereignty has intensified since the introduction of the Data Use and Access Act 2025, and the decision to classify data centres as part of the nation’s critical infrastructure. Both steps underline the government’s intent to make sovereignty a core principle of the digital economy. Post-Brexit divergence from EU regulation has only increased the need for businesses to understand the frameworks that govern their data.

By contrast, Ireland remains aligned with the EU Data Act, which came into effect in September 2025, and has started to shape the country’s dialogue around data transparency, access, and control. As one of Europe’s leading data-hosting hubs and home to many global cloud and technology providers, Ireland plays a more crucial role in the UK’s data sovereignty landscape than one may think.

Cross-border data flows between the UK and the EU are central to the UK’s digital economy, with many SMEs operating in both markets. This makes it essential for these businesses to understand the regulatory differences between the two markets. However, with 68% of Irish SMEs uncertain whether their data is hosted within EU borders, many firms face potential compliance gaps and reputational risks currently.

Across both markets, nearly three-quarters (72%) of SMEs express concern about their data being stored in the United States. Much of this stems from ongoing debate around the adequacy of data-transfer frameworks and the implications of the US Cloud Act. The pressure is no longer coming from regulators alone. Company directors, customers, and employees are increasingly asking questions about where and how data is managed. When policies are unclear, confidence in the organisation can quickly erode.

From Awareness to Action

Although awareness of the issue is growing, many SMEs remain unsure how to act. In the UK, 30 per cent of businesses say they are undecided about switching providers and 42 per cent have no plans to do so. In Ireland, 35 per cent are undecided and 39 per cent have no plans to act, with many balancing the efficiency of global cloud providers against the growing demand for local control.

The findings point to a clear need for guidance, education, and practical support.

For UK SMEs, confidence in data sovereignty is emerging as a business differentiator. The ability to demonstrate transparency about where data is stored and how it is protected can influence customer acquisition, investment, and partnership decisions. Providers that combine clarity with practical support will become partners of choice in an increasingly complex regulatory landscape.

Irish SMEs face similar pressures. The EU Data Act has heightened expectations, making transparency and accountability central to customer trust. Treating sovereignty as a box-ticking exercise risks short-term decisions that can weaken long-term resilience.

Building Confidence through Education and Transparency

Turning data sovereignty into an advantage begins with education and clarity. SMEs need to understand where their data is stored before they can make informed decisions about how to manage it. Awareness of the implications, including regulatory compliance, customer trust, and operational stability, is the first step toward turning sovereignty from a potential burden into a competitive advantage.

Misconceptions around switching providers often hold businesses back. Common fears include operational downtime, system incompatibility, regulatory risks, and hidden costs. Addressing these myths and presenting the real benefits of local or hybrid solutions is essential to building confidence.

Once SMEs have the necessary knowledge, they need practical guidance to act. Local providers can simplify the process by mapping data flows, clarifying regulatory requirements, and offering hands-on support to implement changes effectively.

Finally, government involvement is critical. Prioritising data sovereignty and providing funding or incentives can help SMEs take the first steps toward better control of their data and sustainable long-term performance.

Turning Data Sovereignty into a Strategic Advantage for SMEs

Our research shows that many SMEs still lack visibility and confidence in their data management practices. In the UK, post-Brexit legislation is reshaping the regulatory environment, while in Ireland, EU rules are setting the standard for international best practice. Both markets now have an opportunity to gain a competitive edge through clearer guidance and stronger collaboration between policymakers, providers, and business leaders.

Data sovereignty is no longer just a technical issue for IT teams; it is a strategic matter that impacts security, operational stability, and market positioning. SMEs that take control of their data can benefit from enhanced protection against breaches, invest in local economies and jobs, align with shared local values, and reduce dependence on global markets that may be exposed to disruption from tariffs, geopolitical tensions, or economic turbulence.

By acting now to understand and manage their data, SMEs position themselves to thrive in an economy that rewards transparency, accountability, and trust, turning regulatory compliance into a true business advantage.

Authors: KellySalter (Commercial Director, names.co.uk)& Eamon Kelly (Director, HostingIreland)