Could we be leaving the EU in June?
A breaking update has been announced in last week’s Brexit negotiations. On the 5th April 2018, Theresa May wrote to the EU to request Britain’s leaving date be postponed to the 30th June. The UK is currently set to leave the EU on the 12th April 2019. So what exactly does this mean for the UK’s tech industry? Tech executives have voiced concerns about Brexit's impact on the UK technology sector, with organisations like Tech for UK lobbying for Brexit negotiations that safeguard the tech industry. Last year, they wrote an open letter to Theresa May, explaining how Brexit could affect overseas funding and recruitment. The letter garnered over 1,000 signatures from UK tech professionals.
The digital single market
Leaving the European Union means that the UK will be ousted from the ‘digital single market’. What exactly does this mean for us? Well, the extent of how this could affect the tech sector remains to be seen. And that’s the problem. It’s this sense of uncertainty that organisations like Tech for UK are trying to address. London Mayor Sadiq Kahn recently spoke about the focus on manufacturing in Brexit negotiations. London is a tech world leader, and yet the sector seems to be competing for attention in Brexit negotiations. For growth in the UK’s tech sector to be guaranteed, it must be a primary parliamentary talking point.
Trouble in international waters
British consultancies are predicting what could lie ahead with a no-deal Brexit. One of these firms, GlobalData, recently published a report about Brexit and the global tech industry. In this report, principal analyst David Bicknell stated:
“The big global tech players have the footprint to weather the Brexit storm because they have a big enough boat to ride the waves and a European harbour to sail for.'
Industry juggernauts may have the ability to endure such choppy waters. But, a no-deal Brexit could leave start-ups without a paddle. The storm clouds on the horizon could soon clear once a deal is arranged, but it’s always wise to be prepared for every scenario.
Should we be worried?
The UK’s technology sector is agile and has a history of adjusting to rapid change. Although venture capital investment for tech start-ups has dropped, Britain remains ahead of Europe in terms of funding. For Britain to remain ahead of the technological curve, several issues need to be addressed. Here are a few of them:
Investment in innovation
UK tech investors could struggle to secure funding post-Brexit. The European Investment Bank (EIB) is one of the biggest EU funding streams. It has definitely become a Brexit bargaining chip in recent years. The EIB is not the UK’s only source of funding, but tech companies are not exactly relishing the prospect of tightening purse strings. The EIB’s European Investment Fund has secured capital for many up-and-coming technologies. It was early in funding research into wind power and has backed many UK SMEs and fintech companies. Therefore, this fund has always been something start-ups could fall back on. In January 2019 the House of Lords’ released a publication titled ‘Brexit: the European Investment Bank.’ It confirmed that the European Investment Fund must invest 80% of its capital within the EU. Although this leaves 20% (approximately £460m) up for grabs, the UK will have to compete against the USA and Japan for their share.
Trading across the EU
Many Leavers wanted the UK to forge their own independent trade agreements. Brexit will leave the UK free to do so. But, this could be at the expense of European trade deals that previously funded the tech industry. ‘Passporting rights’ have allowed the UK to trade with Europe under a single license. It is almost certain that the UK will give up these rights to pursue new international ventures. Perhaps the grass will be greener, and the UK will reap the rewards of new global trading. However, deals of this nature are never without risk. Many CEOs rely on EU-regulated trading to serve their European market. As a result, companies are now beginning to open branches abroad. A study from Silicon Valley Bank found that 28% of UK startups plan to open an office in mainland Europe. This could certainly help start-ups keep their foot in the door of EU trading. Furthermore, it gives tech companies a direct link through which they can recruit from Europe’s best and brightest.
Finding new tech talent
In 2017, approximately 8% of tech professionals in the UK came from the EU. Now over two years later, UK residents born in the EU are applying for their right to remain in the UK. The 3.8 million EU nationals in the UK are now unsure if they can continue to legally live and work. This alone could cause a critical staff shortage for the tech sector. Brexit has shone a spotlight on national attitudes towards immigration, and the situation is complicated further by those now wishing to leave the UK. The cap is being lifted on the number of workers permitted from outside the EU, in particular for the NHS. The good news is that artificial intelligence and automation are possible solutions. In spite of this, there is concern about whether the demand for workers will begin to outstrip supply.
What do we do post-Brexit?
It’s important to remember that there is no 100% certainty about how Brexit will affect the UK’s technology sector. But regardless of the outcome, the most important thing to do is to create a post-Brexit strategy. The UK needs to prepare itself for higher stakes when competing with the world’s economic powers. Artificial intelligence is a prominent example, with UK research falling behind the USA and China. UK companies are already investigating if AI could fill skills and resource gaps. There’s no doubt that everyone is feeling nervous around the potential ramifications of Brexit. It’s inevitable that disruption will follow, but it will just take a bit of adaptation to new times. In fact, it could be a valuable opportunity for many tech businesses. Could artificial intelligence potentially help your company post-Brexit? Start your learning journey with IntelAgent today. View our bank of resources for tech companies, or contact us today to book a demo.