IT In A Post-Brexit World

We are (probably) leaving the EU. What does it mean for the IT sector?

Well, that was a bit of a surprise. The Supreme Court’s ruling that MPs must vote on whether the government can begin the process of leaving the EU might give some anti-Brexiters a glimmer of hope, but it’s highly unlikely the UK won’t end up leaving the bloc. Barring, of course, outright sabotage from Parliament.

So what does Brexit, when it surely will happen, mean for the UK’s information tech? Let’s take a look.

Data centre exodus?

A potential consequence of the UK leaving the single market could be the introduction of import tariffs on the UK. But this could spell trouble: Microsoft is one of the giants to have indicated that, should those tariffs get too high, it may consider scaling back its data centre infrastructure plans in the UK.

Speaking at a recent webinar looking at Brexit and tech, Microsoft’s UK government affairs manager Owen Larter said: “We’re really keen to avoid import tariffs on any hardware. Going back to the data centre example, we’re looking to build out our data centres at a pretty strong lick in the UK, because the market is doing very well.” Thousands of UK businesses and public sector organisations, including NHS Trusts, Aston Martin, Marks and Spencer and Confused.com, have signed up to use Microsoft’s cloud services and, in general, Microsoft products are doing well here. Windows Phone is the fastest-growing mobile phone operating system in the UK and Bing, Microsoft’s search engine, now powers more than one in five searches in the UK.

“If all of a sudden there are huge import tariffs on server racks from China or from Eastern Europe, where a lot of them are actually assembled, that might change our investment decisions and perhaps we build out our data centres across other European countries.”

Export challenges?

A recent report from techUK warns that Brexit could have a knock-on effect on the UK IT sector’s exports, which are currently something of a success story. At 16 per cent of gross value added (GVA) - the measure of the value of goods and services produced in an area, industry or sector of an economy - 24 per cent of total UK exports and three million jobs, firms that deal in digital technology make up a “large, growing” part of the British economy, and are therefore vital for jobs and growth.

But techUK is warning that Brexit poses significant risks to the IT sector, particularly around market access and digital trade, access to skills and the free flow of data. Jacqueline de Rojas, president of techUK, said: “There is no sector more dynamic, more innovative, more resilient than tech, but that doesn’t make it immune to Brexit.

“As this report makes clear, there are real risks that need to be understood and addressed. The UK’s thriving tech sector can come through this process and go on to power the vision of Global Britain.”

There are heavy concerns that leaving the EU will make it much harder for tech firms to hire talented employees, especially in London where it is very diverse. Taavet Hinrikus, chief executive officer of money transfer start-up TransferWise, told Business Insider that Britain would be “crazy” to leave the EU.

"The EU means free movement of talent, and in a market where it’s competitive to hire great people this flow of talent within Europe makes recruitment a lot easier. We have 40+ nationalities working together at TransferWise: to grow an international business you need an international team and access to the best talent in the world."

Are you ready?

Are you prepared for Brexit? Probably not. Recent research by Curo Talent found that just four per cent of IT teams are prepared for Brexit preparation. According to Curo’s head of marketing Graham Smith, however, this might not be too bad a thing: “In terms of Brexit, there are a number of arguments as to why the IT team may be right not to be concerned. Firstly, even after Theresa May’s speech on 17 January, there is little detail about the impact of Brexit. So why worry about a challenge you cannot see?”

But others are concerned. In a post for Computer Weekly, Ross Anderson, professor of security engineering at Cambridge University and a fellow of the Royal Society, warns how ‘network effects’ - the effect that one user of something has on the value of it to other people - could damage the UK’s tech industry if Britain leaves Europe. In his post Anderson warns that a post-Brexit UK would have little influence on IT markets.

“Most software markets have been global for decades,” he writes.

“The EU has real clout though. From the viewpoint of Silicon Valley, Brussels is the world’s privacy regulator, since Washington doesn’t care and nobody else is big enough to matter.

“If you want someone to police the side-effects of network effects and globalisation, the European Commission is just about the only sheriff in town.”

But if we’re not in it, we does that leave us? Time, as ever, will tell.