What impact would Brexit have upon the digital and tech sector?

Via The Guardian

The UK’s referendum to decide whether Britain should remain a member of the European Union will be held on Thursday 23 June; less than three months away. The most recent Brexit opinion poll by The Telegraph showed that the ‘Remain’ campaign has gained a narrow lead standing at 51%, after trailing last month. ‘Leave’s’ support has decreased five points to 44%, with only 5% of voters saying they are undecided. Turnout will be crucial in determining the final result, but with such close margins, weighing up the pros and cons of a Brexit for the UK’s thriving digital and tech sector is a critical debate, which hasn’t received an awful lot of exposure.

If we consider some stats, a very recent poll in March by Tech London Advocates found London’s technology sector to be strongly against Britain exiting the EU. It asked 3,000 senior members of the London tech scene their opinion on Brexit, and a resounding 87% said they opposed Brexit. Only 3% declared they wanted to leave, with the remaining 10% as yet undecided. Russ Shaw, the founder of Tech London Advocates, said: “London has established a global reputation as the digital capital of Europe. There is significant concern within the digital community that Brexit would undermine this position and threaten relationships with the European market.” Similarly, a 2015 survey of techUK members also found that 71% favour staying in a reformed European Union, with a further 17% saying they would stay in regardless of further reforms. There has even been talk of some companies relocating in the event of a ‘leave’ vote. On the whole it seems the UK tech and digital sector believes firmly that future success of the industry depends on Britain remaining in the EU. Brexit fears for the digital and tech sector centre around three core areas…

The creation of a skills and talent shortage

Research by TLA in December and January found that 43% of respondents said a talent shortage was the biggest challenge currently facing London’s tech sector. Among the professions urgently required, software developers and engineers sat at the top (as voted by 44%), with data scientists and cyber security experts also being needed. These are skills that can currently be more easily hired from outside the EU, if employers demonstrate that they initially looked domestically. Within the latest changes to immigration rules announced in October 2015, four digital technology jobs (product manager, data scientist, senior developer and cyber security specialist) were added to the tier 2 visa shortage occupation list, indicating it’s a situation to be taken seriously. Revisions were also made to the tier 1 Exceptional Talent visa scheme to help alleviate these skills shortages in the UK tech sector. But four-fifths (81%) of those polled by TLA in March believed that Brexit would make it harder to employ people from EU countries. In particular, if the free movement of workers within the EU ends, the concern is that this would negatively affect the ability of UK tech and digital businesses to access developers and engineers with the right skill sets from abroad. An alternative view is that if Britain votes to leave the EU, this might present the opportunity to agree a new framework of specific, tailored immigration laws, which might be more favourable for attracting digital and tech talent from overseas. But this would take time to implement. EU-GB-flag Via Pi Media Online

It would be harder for British companies to trade and reach EU customers

A Brexit could have an immediate impact on supply and trade for British businesses, which would make reaching customers in EU countries more difficult. According to reports, the forthcoming referendum is already having an impact on trade negotiations, with some discussions being stalled over implications a ‘leave’ vote may have upon existing deals. If Britain leaves the EU, tech and digital firms are likely to see contractual terms changing, and in particularly see agreements becoming shorter in length. Overseas businesses will be careful to protect themselves against ‘leave’ fallout. A decision to leave would also have impact on the regulatory environment for tech and digital businesses, and crucially for those dealing with customer data. The General Data Protection Regulation (GDPR) is a new regulation expected to be enforced by 2018, designed to strengthen data protection for individuals across all EU member states, and for businesses, regulates exporting personal data outside the EU. In the event of Brexit, new agreements would need to be formed between British firms operating in Europe and with European companies. In the hyperconnected world in which we now live, Britain would need to ensure that the free flow of data between the UK and the EU can continue safely.

Impact on investment

Britain, and in particular London, has been a go-to destination for overseas tech and digital start-ups wishing to raise early-stage funding. Similarly, overseas investors have been attracted by the innovative business ideas being incubated in the UK. The concern is that Brexit would impact this trend significantly, preventing British businesses from accessing overseas investment, and hampering their expansion into new international markets. It could also make London a less attractive location for overseas start-ups to come and seek funding. Consequently, London may lose its reputation as a hotbed for disruptive start-ups and innovation, and attention may shift to other cities that have been eyeing-up the start-up scene, such as Berlin, Lisbon, Dublin, and Barcelona. Whatever happens in June, fears for the future success of Britain’s tech and digital scene appear well founded. Businesses need to be able to continue to access global markets and talent, and a ‘leave’ vote could have far-reaching implications… If you are still unsure what to vote, this blog post from Portland Brown outlines the arguments well.

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