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The Impact of Brexit on The IT Industry

As we’re getting closer to the 29th of March 2019 where Brexit will be enforced, it’s important to discuss its impact on one of our country’s most promising sectors, which is the information and technology sector.

The Aftershocks and The Current Situation

In the immediate aftermath of the Brexit Vote, the currency rate of the pound against the Dollar and the Euro dropped dramatically. This affected the UK economy as a whole and the IT industry was no exception. A large amount of Hardware and Software required in the UK is produced by other members of the European Union and the United States, meaning prices rose rapidly for tech companies and their end user. Although there has been some recover at times in the exchange with the US Dollar it remains low now along with the Euro exchange rate which has never recovered and declined further still.

Until March 2019, the UK will remain a member of the EU, which means that no legal changes will affect UK businesses in the time being and probably not until the end of the 21-months transition period as well. After that, the impact depends upon which terms the UK and EU have agreed on for building their future relationship.

In the last few weeks, talk of a no-deal Brexit started looming and people are divided about its possible impact on our industry. Even though the tech industry is known to be flexible and can quickly cope with changes in the market, there are few points to consider:

Data Protection

Before March 2019, the collection and protection of personal data in the UK will still be governed by two laws: The GDPR, which is an EU-level legislation that governs data protection and privacy for all individuals within the European Union and the European Economic Area, and the Data Protection Act 2018, which is a national law that updates the data protection laws in the UK and complements the European Union’s General Data Protection Regulation.

After March 2019, there will be no immediate changes regarding the data security and privacy standards within the UK as the Data Protection Act 2018 will remain in place. The main concern is the flow of data between the UK and EU. The GDPR states that EU organisations are not permitted to transfer personal data outside of the EU unless there is a legal basis for doing that. They are however permitted to transfer this data within the EU.

The UK government has clearly announced that in case of a No Deal, the UK will still allow the flow of data to the EU. UK organisations on the other hand will need to actively discuss with their EU partners on which legal basis they can receive personal data from them. This could be for example the standard contractual obligations a client may have with both the UK organisation and its EU partner.

There’s another option on the table: The EU can make an adequacy decision through which it allows the flow of data to the UK without restrictions. The decision can only be taken if the EU deems that the UK’s level of personal data protection is essentially equivalent to that of the EU. The conversations about this are still ongoing and it’s not clear yet if the EU will take such decision.

Workers

A recent report by the Office of National Statistics states that EU nationals contributed 7% of the UK labour market in 2016. The highest number of EU-nationals (510,000) were employed in elementary occupations and low-paid jobs compared to 352,000 employed in professional occupations.

A no-deal Brexit will affect the tech sector at two levels: The sudden shortage in IT professionals and difficulties in filling vital low-skilled tech jobs.

A report by the university of Oxford’s Migration Observatory said that the UK have two options to help EU migrants entering the UK and avoid the negative impacts of a no-deal Brexit: expanding an existing “Youth Mobility” scheme to include EU countries, or introducing a work permit system specifically for low-paid jobs in some industries.

EU Funding

The European Investment Fund (EIF) has already shut the door in front of UK tech startups as its 2017 contribution to UK focused funds has fallen by 91 per cent from 2016. The EIF’s overall funding to the EU remains stable at €9.3 billion. The UK focus funds have on the other hand dropped from €708.8 million in 2016 to only €61.1 million in 2017 with no future funding foreseen.

Looking at the bright side, the recent report by Tech Nation states that London is the second most connected ecosystem in the world and the third global start-up ecosystem. It is important that we all look to the outstanding capabilities of our tech sector, think beyond our boarders and invest in our national skills to maintain the growth of this sector and eliminate the possible negative effects of a no-deal Brexit.

What’s your opinion about this subject? Please share it with us in the comments below.

 

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