Privacy, Networks, Funding And Talent: How Brexit Will Affect UK Tech

ANALYSIS: The UK technology industry opposed Brexit but now it has to face the consequences of Britain leaving the EU

It goes without saying that Tech City leaders support this view and say they will do everything they can to ensure the UK remains at the forefront of technological innovation.

“The UK has always been, and will continue to be, a world-class country with world-class resources and assets: including talent, innovation, legal framework and a supportive government,” it said. “It’s a financial services super-power and global tech hub.”

The privacy and security challenges

But what about end users? The most immediate issues could be compliance and infrastructure.

The heads of MI5, MI6 and GCHQ had all warned prior to the vote that the UK would be less secure outside the EU, but the main concern within the industry appears to be privacy and the data protection laws afforded by membership. The suggestion is that security companies might choose to setup outside the UK where they have greater assurances of privacy

network scan machine fingerprint privacy security © Bruce Rolff ShutterstockHowever the Information Commissioner’s Office (ICO) says the UK’s data protection standards would have to be equivalent to the EU’s General Data Protection Regulation (GDPR) due to come into effect in 2018 if the country still wants to trade with the EU.

“The Data Protection Act remains the law of the land irrespective of the referendum result,” said an ICO spokesperson. “If the UK is not part of the EU, then upcoming EU reforms to data protection law would not directly apply to the UK. But if the UK wants to trade with the Single Market on equal terms we would have to prove ‘adequacy’.

“With so many businesses and services operating across borders, international consistency around data protection laws and rights is crucial both to businesses and organisations and to consumers and citizens.

“Having clear laws with safeguards in place is more important than ever given the growing digital economy, and we will be speaking to government to present our view that reform of the UK law remains necessary.”

Network investment

Brexit could also affect investments in broadband and mobile infrastructure. BT and Virgin Media had urged their employees to vote Remain in the final days of the campaign and said future network investments were at risk if the UK was no longer a member of the EU.

The Economist Intelligence Unit (EIU) predicted that as a member of the EU, telecoms investment would have risen by 29 percent between 2015 and 2020 compared to 23 percent in the event of a Brexit. Revenues would have risen by 21 percent over the same period if ‘remain’ won, but now it is predicted they will grow by just 12 percent.

packetfrontOpenreach CEO Clive Selley told TechWeekEurope he was concerned that a predicted recession would mean consumers and businesses have less to spend on communications, while Virgin Media said it would reconsider future network investments – although the £3 billion Project Lightning expansion is not at risk.

“We respect the outcome of today’s vote and expect it will have little discernible impact on Virgin Media or our broader European business,” a Virgin Media spokesperson said. “Our balance sheet is entirely hedged against currency fluctuations and our Project Lightning investment plans in the UK are locked in for the next three years, remaining well on track.”

Looking to the future

David Cameron’s resignation as Prime Minister came with the caveat that he would not exercise ‘Article 50’ and initiate an exit during his final three months in Downing Street. This means his successor will be the one to formally start the process of leaving the EU.

safe harbourThis gives the government time to negotiate a settlement that could include access to the digital single market and other provisions. At this stage, everything is speculation, but UK technology is getting to grips with a post-EU world.

The decision to leave the EU is one the industry would not have taken in isolation and there are genuine concerns, but all is not lost according to one observer.

“My view is that the core attributes that make the UK Tech sector so strong and attractive remain in place, including an amazing talent base that has a long track record of creativity,” said Tudor Aw, head of technology sector at KPMG UK.

Add to that the great infrastructure and facilities; first class universities, a stable legal system; appropriate fiscal incentives; and an ecosystem of advisors that support the needs of tech companies. Technology is a sector that will only increase in importance and works without borders, I therefore continue to see the UK Tech sector as one that will not only withstand the immediate challenges of the referendum result, but one that will continue to grow and thrive.”

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