One week on from Brexit – Is this a time for concern for UK tech, or is it a case of ‘keep calm and carry on?’
In an age where disruption, innovation and adaptability are seen as everyday challenges in one of the UKs flagship sectors, is Brexit really a cause for concern for the tech sector, or is it already primed for such challenges?
It’s no secret that the majority of tech firms wanted a ‘Bremain’ result to carry forward the momentum for what has been a meteoric rise over the last six years. Just prior to the EU Referendum, The UK’s technology trade association, techUK, surveyed 277 technology business leaders and found that 70% were in favour of staying in the EU, with only 15% supporting a Brexit.
It’s fair to say uncertainty can affect confidence, which in turn can affect business growth and investment. The UK’s digital economy last year saw an incredible level of investment of more than $3.5bn. The sector is growing more than 32pc faster than the economy at large, and is creating jobs 2.8 times faster, also. UK tech leaders, no doubt, wanted more of the same for 2016; a case of keep on, keepin’ on.
Just a quick glance at our tech ecosystem, however, paints a picture of a portfolio that is rich and diverse, with particular strengths in Fintech, cybersecurity, and user design (UX). In the North East we have considerable strengths in engineering design, East Midlands excels in manufacture of electrical equipment, East of England is a hub for biotechnology, with London and the south east leading the way in big data, programming and Fintech.
Technology knows no boundaries with the UK ingrained into the global landscape, both as a thought leader and facilitator of innovation. To suddenly cut ties would be akin to cutting off one’s nose to spite the face. The tech community is a global one, which is mutually beneficial. David Johnson, director of Halo Financial, recently commented “on average, the balance of trade gain that Europe makes from its business with the UK is roughly £8 to 9bn per month. That trade and contribution advantage of £105bn a year is far too lucrative for the EU to want to lock Britain out of the club, even if the UK votes to leave the EU.”
It would be remiss of me, however, not to discuss further the potential dangers of a post Brexit environment.
Investment, as alluded to above, is an area of uncertainty. The question is will start-ups and global funds now see Berlin – seen as one of our main competitors of the last three years – as the best place to set up HQ to benefit from a single market?
Looking to our talent base – the fuel of any successful tech company, there is already a noticeable gap in skills, with short falls filled by talent from predominantly Eastern Europe. The current rate of students or career-changers studying computer science, related subjects or professional certifications falls woefully short of the sectors requirements, therefore the new UK Government – once in place – needs to act swiftly and decisively to ensure talent can still be sourced from within the EU, but also reassure those that are already here that they plan to build our digital and technological futures together.
The UK is also seen as a jumping off point for US tech firms looking to do business in Europe, who historically favour securing permanent establishments (PEs) in the UK over continental Europe. Given our long standing relationship it will be interesting to see how they react in light of an EU-lite UK.
One question which also isn’t being asked as much as it should is how long will it actually take for the UK to separate from the EU? It’s fair to say that 40 years of marriage will take longer than two years to untangle.
The mood at yesterday’s VentureFest event in Oxford, which attracts entrepreneurs, VCs and tech thought leaders, was most certainly one of positivity and resilience. UK tech has already weathered the dot-com bubble and the global credit crunch to become a mainstay of the UK economy.
"The core attributes that make the UK sector so strong and attractive remain in place," said Tudor Aw, head of the technology sector KPMG UK.
One thing is for certain, an understanding Government with a strong digital agenda will give our thriving tech sector every chance of succeeding.
Continued access to the Single Market must be the primary objective of any UK negotiation if the sector wishes to continue its explosive growth. Also, business policies that act as enablers, canny taxation and a ‘smart immigration’ policy that prioritises the needs of the sector will give UK tech the necessary conditions it needs to do what it does best – grow, excel and lead!
As things become clearer in the aftermath of Brexit, it’s important our UK technology clients stay close to their respective advisors to ensure they are well placed to take advantage of the UK’s ever changing market place.
If you have any immediate Brexit questions please contact Jason Mitchell or send enquiry as we are interested in discussing this with you.