UK to exit the EU: What are tech firms worried about?

Technology firms operating in the UK identify the biggest challenges facing the IT industry following the British public's decision to leave the EU.
Written by Nick Heath, Contributor
Image: iStock

The UK has voted to leave the EU, sending shockwaves through UK financial markets and temporarily reducing the value of the pound to a 30-year low.

The process of the UK leaving the EU is likely to take years, with no set date for when Britain will begin the process of negotiating its withdrawal and agreeing on a new EU-UK trade deal. However, the Leave campaign wants a new deal to be in place by 2020.

The referendum result will have many different impacts on tech firms: on their ability to employ non-UK workers, on research grants, on trade tariffs and on data protection.

Skills worries

Major tech firms that do business in the UK have urged Britain's future governments to try to preserve the open movement of workers between the UK and the EU that exists at present.

UK-based ARM, which designs the chips inside 95 percent of smartphones, was concerned about the impact on non-UK based workers.

"Brexit will not have a significant impact on our business, as almost all of our earnings come from outside the EU zone, but we will watch the negotiations closely, particularly on the subject of visas, as we employ approximately 200 non-UK EU citizens at our Cambridge headquarters," a spokesman said, also highlighting the prospect of ARM losing out on a small amount of EU research grants.

Although there will be no short-term impact, the rights of those EU workers to continue living in the UK are not guaranteed, according to an assessment by legal experts, who raised the likelihood that individuals would eventually need additional documentation to prove their right to remain.

Ensuring that EU citizens working for firms like ARM are able to continue working in the UK should be a priority for government, said Kerry Hallard, CEO of the National Outsourcing Association.

"It is also paramount that our government does everything it can to protect the rights of EU citizens living and working in the UK. The valuable skills they bring to the outsourcing industry and our country are essential to the wellbeing of our businesses and economy -- they will be significantly missed if those individuals are forced to leave our country."

Meanwhile, the Corporate IT Forum (CITF) -- the membership organisation for IT leaders at FTSE 250 organizations -- is worried about how future recruitment difficulties could exacerbate existing skills shortages within the tech industry.

"For technology functions based in the UK, the particular concern is over shortages of IT skills and now the increased risk of much more difficult and more costly recruitment of IT professionals from the EU," said Joanna Poplawska, executive director of the CITF, while predicting the short-term turmoil in FTSE250 share prices would stabilize.

The BCS, the Chartered Institute for IT, echoed the need to not shut the door on EU skills.

"We must apply a sophisticated view of digital talent to our negotiations with the EU, recognising that IT is a global sector and profession, and that we need to grow and attract the best talent into the UK digital domain," said director of policy & community David Evans.

Tech giant IBM made a similar appeal to the British leadership.

"We call on the UK government to adopt a stance in forthcoming negotiations aimed at ensuring that the country's economy remains successful, open, competitive and innovative," said a spokesperson for IBM.

The decision to leave could also hit funding for the UK's thriving network of tech startups. Jon Moulton, founder of private equity firm Better Capital, told the Financial Times that the Luxembourg-based European Investment Fund is the largest investor in UK venture capital firms and warned the European fund "would probably stop investing in the UK" if Britain left the EU.

Ahead of the referendum vote, none of the UK startups that have grown into unicorns, private companies with a valuation above $1bn, supported Britain leaving the EU.

What to do with British data?

Another concern for tech firms is what Britain's exit from the EU will mean for how they handle data from UK firms and citizens: how they process it and where it can be stored.

The EU is currently in the process of negotiating a new EU-US Safe Harbor agreement, Privacy Shield, that will set out the terms under which transatlantic transfers of personal data can take place. Companies operating in EU member states also have until June 2018 to comply with the new General Data Protection Regulation (GDPR), which sets out far-reaching changes to how organizations handle personal data.

These new data handling agreements are likely to be binding on companies operating in the UK for quite some time, according to data governance and risk specialist DQM GRC, given the time it will take for the UK to extract itself from the EU.

"In my view the long term impact of a 'Brexit' on the legislative framework for privacy will probably not be hugely significant," said Peter Galdies, development director at DQM GRC.

He said the process of leaving the EU was unlikely to begin until at least October this year, and that this would only be the start of protracted negotiations.

"There will be a mandatory two-year minimum period in which we remain a member of the EU whilst we negotiate an exit. During this time all existing legislation, including GDPR, will continue as before."

"Many forecast that this process might take much longer, with many estimates between three and six years," said Galdies. "The pressure to negotiate a strong trade deal with the EU will also drive the adoption of 'mirroring' legislation -- designed to minimise the barriers to continued trade."

CITF's Poplawska said its members are keen to see the government clarify how companies operating in the UK should proceed with regards to data handling.

"Our members will have many questions that will need to be answered -- for example, where we stand with data protection as the EU General Data Protection Regulation was passed recently after four years of negotiations and is due to be implemented across the EU in 2018."

IBM's spokesperson said it was important that Brexit did not result in new barriers to the free movement of data between UK and EU countries.

"We also encourage leaders throughout Europe to preserve cross-border data flows that drive growth and innovation, and that underpin the worldwide digital economy."

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