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Around 18% of the UK’s SMEs export goods or services, and many more sit inside global supply chains where data moves across borders every day.

This constant movement makes sovereignty, the obligation to store and process data according to jurisdictional rules, an unavoidable reality.

Co-founder and Director at Hyve.

Sovereignty is no longer just about compliance; it’s also part of the resilience conversation. The recent AWS outage disrupted UK services, including those of HMRC and major banks, highlighting how issues in the US can impact critical operations in the UK.

The event also coincided with the UK CMA’s market investigation, highlighting barriers to switching, including egress fees, which matter when SMEs need location control or a rapid exit.

These trends are definitely shaping how SMEs do business. Larger partners will apply their own sovereignty clauses, meaning compliance is often a prerequisite for securing or maintaining contracts. However, many smaller firms lack the in-house expertise to interpret complex regulations or manage cross-border data obligations.

So, for SMEs, the priority now is to work with experienced providers who can translate regulatory expectations into practical, scalable solutions, starting with a clear understanding of which rules apply to their data.

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Scoping the challenge

Cross-border activity quickly exposes SMEs to overlapping rules, where compliance in one country may trigger obligations elsewhere. Managing this overlap is difficult when internal teams have limited capacity to track evolving legislation.

The challenge is compounded by shadow IT and unmanaged SaaS, which can quietly move data into unapproved regions. Once this happens, reliance on a single provider can slow remediation, particularly if exit strategies are unclear.

In this environment, even small oversights risk financial penalties, reputational damage and lost supply chain opportunities, which could be detrimental to smaller or mid-sized businesses.

This scope is not limited to personal data. Commercial information, technical documentation, telemetry, logs, and backups can trigger the same questions about where data resides and who can access it.

When services are stitched together across multiple vendors, each integration introduces another decision point, and potentially, another jurisdiction.

These realities explain why sovereignty has moved up the agenda and point directly to how SMEs should address the issue.

Finding the right solution

The above risks are best addressed when sovereignty is built into infrastructure from the outset, rather than being added later. It is also essential that this is clearly outlined in the contract and other relevant agreements.

Hosting providers that make data residency transparent, showing where information lives and how it is accessed, create a foundation for trust and audit readiness

Although the hyperscale platforms provide reach, their standardized offerings lack the flexibility that smaller firms require for residency, access segmentation and exit planning. For these companies, partnering with independent and agile MSPs may be a more logical choice.

Such providers offer customized solutions that comply with local regulations, certification frameworks, and in-country expectations. They also provide ongoing management and support, which are equally important as regulatory and contractual requirements change, and controls must keep pace.

Beyond infrastructure, practical data classification then gives staff clarity, helping them separate information that can move freely from data that must remain local. At the same time, access controls such as MFA and least-privilege ensure productivity without creating exposure.

Recovery plans also need to align with immutable backups and tested failover that keep RPOs and RTOs within approved jurisdictions. Finally, migration runbooks and clear exit paths give SMEs the flexibility to adapt quickly if requirements shift.

Set against the wider context, this explains the urgent need to address the sovereignty issue.

What good looks like in practice

In practice, providers make residency and access explicit. They state where primary copies, replicas, backups, and any archives reside, and they assign clear accountability for who can reach each layer. That clarity reduces audit friction, improves handovers, and removes guesswork.

Location control is enforced rather than assumed, using regional locks, customer-managed keys, and sensible segmentation to keep data where it must be.

Third-party vendors and SaaS platforms are reviewed on a defined cycle to confirm that supply chain partners continue to meet the same standards, with findings fed back into configuration, training and contractual terms.

Monitoring produces audit trails that regulators and customers can use, not just raw logs. Tabletop exercises and recovery tests demonstrate that controls hold under pressure, with failover and restores completing inside approved jurisdictions and within agreed RPOs and RTOs.

Contracts carry SLAs, audit rights, breach notifications, and clear remediation commitments, so technical safeguards are anchored in enforceable obligations. Handled this way, sovereignty supports resilience and service quality and creates space to plan for growth.

With these practices embedded, organizations can move forward with confidence.

Moving forward

The question that small and medium-sized businesses are asking more and more often, especially those that are growing or working with larger supply chains, is: where exactly is my data?

A credible answer will be short and specific. It names the countries where live systems and backups sit, and it explains who can see the data, when, and why. It shows how information moves between services, and where movement is restricted.

With that clarity, reviews by customers, regulators, and insurers become routine rather than disruptive.

Resilience is part of the answer. If a provider fails or a region goes offline, service will need to continue from another approved location, and records should show that the switch stayed within the right borders. If rules or contracts change, there will need to be a clear, rehearsed path to move data without interrupting the business.

Contracts and day-to-day operations should always match, while commitments on residency, access, and notifications should be visible in how systems run, and suppliers in the chain meet the same standard.

When an SME clearly understands where its data resides, sovereignty will work in its favor. It opens doors to regulated customers, reduces risk, and keeps future choices on providers and regions open as the business grows.

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Jon Lucas is Co-founder and Director at Hyve.

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