ANALYSIS: The UK technology industry opposed Brexit but now it has to face the consequences of Britain leaving the EU
In the early hours of June 24 2016 it became apparent that a narrow majority had voted for the UK to leave the European Union (EU) in a nationwide referendum.
The decision will extend into virtually every part of British society and the full implications will not be known for months, if not years.
But it is not too early to speculate what a Brexit will mean for the UK technology industry, the majority of which opposed leaving the EU.
Tech support for the EU
Just 15 percent of techUK members and three percent of Tech London Advocates members said they wanted to leave.
The UK heads of IBM, Microsoft and SAP were among 34 to have signed an open letter urging the UK to vote ‘remain’ and only a third of TechWeekEurope readers believed the UK technology industry would be better off outside the EU.
“We believe staying in the EU is the best choice for the UK economy,” said the letter. “A decision to exit the EU would leave tech firms and their customers, facing significant and prolonged uncertainty and leave the UK side-lined on key decisions that will shape a digital market of 500 million consumers.
“The UK’s tech sector is a global success. It is growing faster than the rest of the UK economy and creating new businesses and jobs across the country. EU membership has underpinned that success. A vote to leave would undermine it.”
Now that 52 percent of the electorate have said they want to leave the EU, many of these advantages no longer apply.
The falling value of the pound and the suggestion that many multinational companies could depart for Ireland, France or Germany in response to the result will affect many industries, not just technology. Now the government’s attention turns to negotiating with the European partners it’s leaving behind and the industry will be keen to maintain many of the benefits it has.
“As the global business community considers the outcome of today’s vote, we call on the UK government to adopt a stance in forthcoming negotiations aimed at ensuring that the country’s economy remains successful, open, competitive and innovative,” IBM told TechWeekEurope. “We look forward to continuing to help the UK retain its position as a leader in the world’s digital economy.”
“It’s business as usual for BT,” said a BT spokesperson. “We are also here to support our corporate customers as they develop their own plans in response to the Leave vote.
“We’ll work closely with the British Government and EU during negotiations to ensure BT’s views are heard as our goal is to protect the interests of our customers, employees, shareholders and business.”
London Tech City
London was in favour of staying within the EU and its work to attract startups could be undone by the decision to leave – especially if it affects the capital’s status as a European financial centre. A lack of access to the same funding and talent could cause young companies to go to other hubs in Europe.
“London in particular has enjoyed a period of being the European Hub of tech development,” said Graham Seddon, partner at law firm Menzies. “The access to funding, talent pools through freedom of movements and large international tech business choosing to establish offices in London have provided a real competitive advantage to London.
“With the uncertainty of Brexit now a reality, the tech sector faces a number of potential challenges. Some high profile companies have strongly indicated that they will consider exiting the UK. Impact on sterling, interest rates and access to funding over the coming months as a result of the UK choosing to go it alone are at best going to cause some bumps in the road and at worst, we could see fledgling tech companies disappear off the map.”
“We sympathise with the next generation of startups, who may suffer without some of the advantages that got us where we are today,” added Hiroki Takeuchi, CEO of GoCardless.
The principle of free movement means UK tech firms can hire some of the best talent in Europe. With a visa system in place, this would create restrictions for companies amid concerns of a skills shortage in the UK.
“The prospect of having to apply for visas and fight our way through reams of red tape to access the highly-skilled workforce that’s essential to our business, could really slow us down,” claimed Brian Spector, CEO at security firm Miracl.
“The UK has a well-documented shortage of tech talent that means it simply cannot compete globally without tapping into highly-skilled overseas workers. Splitting away from Europe would make it even more difficult for UK tech firms to compete with the US tech giants, because their talent pool would be so much larger than ours.”
The impact on the city could have a disproportionate impact on London’s fintech industry. However companies are divided about how great the blow will be.
“This is also a blow to London’s financial services industry: many companies here depend on both EU market access and the ability and legal right to passport their services to the rest of Europe,” said Michael Kent, CEO of Fintech firm Azimo. “I anticipate that we’ll see many finance players moving some, or potentially all, operations to elsewhere in Europe. Frankfurt, Amsterdam and Dublin are all obvious candidates.
“The good news is that the FinTech industry is thriving across the whole of Europe at the moment, should London’s position as the heart of European FinTech now change as a result of this vote.”
“London’s advantageous time zone, strong financial history and FX expertise aren’t going to disappear overnight,” countered Mike Laven, CEO of Currencycloud. “Somewhere else in Europe being a global financial capital. Seriously? It took decades to develop the infrastructure of firms, services, lawyers, insurers, intermediaries, and myriads of financial niches and massive personnel base that makes London special.”
Continued on page 2: How Brexit will affect end users