What might Brexit mean for the tech sector?
The UK is undoubtedly heading for change. Huge change.
Scarily, none of us really knows what that means just yet.
Brexit, whether you agree with it, or not, is hanging over everyone like the sword of Damocles; it will either fall and prove the Brexiteers right, cutting through all the red-tape and bureaucracy, or it will cut through a major artery and cause huge problems.
Both the leave and remain camps are certain it will fall as they predict.
The tech sector is located right in the middle, with so much of the industry reliant on cross-border partnerships and co-operation.
Obviously, the ‘nobody knows’ point hangs heavy over everything at the moment, making any prediction fall into the ‘pure speculation’ category, In reality, it’s probably just too soon to tell, but as more details are released, the emerging picture becomes clearer.
As technology develops, every business will become more and more ‘digital’, blurring the lines between the technology sector and everyone else, who isn’t purely a coding or development business.
As we have mentioned before, the digital economy is building quickly and a huge number of what might be considered ‘digital jobs’ are actually in the ‘traditional’ or non-digital sector.
So, what impact might Brexit have on all of this in years to come?
The Single Market
According to a post-Brexit poll, carried out by Tech City [http://www.techcityuk.com/blog/2016/07/tech-reaction-to-brexit/], 85% wanted to see the UK Government working to remain part of the European Single Market.
It’s fair to say that the talk coming out of Government so far, has not been consistent, with some ministers saying there will be a ‘soft Brexit’ and others pushing for a ‘hard Brexit’.
Again, there is even question over what these definitions mean, so it’s difficult to pin a definite outcome down.
As negotiations continue, the single-market will become one of the key negotiating points.
Freedom of Movement
This point in the UK/EU negotiations will be key for many business owners and entrepreneurs.
Tech City’s poll found that 70% of employers wanted clear direction on the question of EU residents’ ability to live and work in the UK.
The Government is giving an indication of allowing this, with an assurance that EU residents currently living here, will be able to continue to do so, but the issue of freedom of movement is much more contentious.
There is also the consequence that many Europeans, currently living in the UK, are being unsettled by the uncertainty over Brexit and are already leaving for other EU countries.
In 2016, 117,000 EU citizens left the UK – up by 36% over the 86,000 who left in the previous year.
It’s clear that there will be an impact on the availability of talent if freedom of movement ceases and what that means for TechTown is yet to be seen.
Business, Economy and Finance
We’ve already seen how the currency markets and FTSE respond quickly to anything that makes investors nervous.
The value of Sterling dropped immediately following the Referendum result and has not regained its pre-referendum value.
For businesses that already export to Europe, this has given them a boost in revenue, as the falling value of Sterling makes it cheaper for overseas customers.
This is especially true for the manufacturing sector.
It may be a short-term boost, however, as the possibility of tariffs looms high on the agenda, as the UK Government will have to negotiate trade deals post-Brexit.
For those businesses who buy goods and services from overseas, the drop in Sterling has had an immediate effect, making it more expensive for them to source what they need.
One UK company told us of renewing a software license and the cost increased substantially, compared with what they had paid a year before.
For business owners, this has a big impact, with almost a quarter saying they expect to redraw their plans for growth.
The Bank of England forecasted investment stagnating “at best” and the European Commission predicted a sharp drop.
Everything depends on what type of Brexit we get.
A Hard Brexit will undoubtedly mean some things will become more difficult – there will be less opportunity for SMEs to enter the European market, they will not have the same possibilities to find, do business, collaborate or partner with their contemporaries across the channel.
It’s not all pessimism, many business owners are getting on with business as usual and less than a third, according to Tech City, say they are likely to reduce their plans for hiring new staff.
All of this has to be taken in context with the growth of the UK tech sector, which has seen phenomenal advances and growth in recent years.
This is not unique to the UK; in the G20 countries, where it accounts for 8% of GDP.
The importance of the digital economy will become more prominent as technology moves forward and the UK Government has published its Digital Strategy to ensure the country is able to keep up with the market across Europe and beyond.
Outside the UK
It may appear that European tech entrepreneurs have less to be concerned about, in comparison with their UK counterparts, but undoubtedly, there will be an impact.
Skills are in demand – the need for experience and knowledge far outweighs the availability of people who can meet it.
Where there were opportunities for European learners to spend time working with established tech companies in the UK and then transfer the knowledge back to their hometowns.
This ‘skills-flow’ will dry up if the movement of people in the sector is stopped.
Research and development is one key area that may see a huge impact, as a result of Brexit.
Undoubtedly, there will be changes in both availability and access to funding for the development of new tech.
According to Tech London Advocates*, one in ten London tech firms has already seen European research funding withdrawn.
This impacts on collaborative projects, which help to develop new technology, but also on the cross-border development of talent that is essential to drive the digital sector forward in the future.
It’s counter-intuitive to the basic aim of all new technology, which is that it has to be inclusive.
What would be the purpose of investing money in the development of innovative products and services that are not accessible to the people and organisations they would benefit most?
The possible impact on research and development has a logical knock-on effect on distribution and learning.
Both of which are essential to ensure new technology is able to reach its full potential.
All in all, the uncertainty around Brexit is currently the biggest risk to digital jobs and technological advancement.
Hopefully, as negotiations continue, there will be greater clarity over the issues that matter to the digital sector.
Until then, it’s really too early to say, or offer any degree of assurance to entrepreneurs, businesses or investors in tech.
It really is a case of watch this space, which isn’t helpful at all.