As Article 50 is triggered - what does Brexit mean for the tech industry?
This entry was posted on March 29, 2017.
The UK technology sector was an incredibly vocal supporter of Britain remaining in the European Union. In the lead-up to the referendum, large tech corporations spoke out several times in support of remaining part of the bloc, and it was undoubtedly a blow when the news of the British people voting to leave broke on the morning of 24th June.
In fact, so much was the support for remain among tech companies that before the referendum, a techUK survey of 277 technology business leaders found that 70% were in favour of staying in the EU, with just 15% supporting Brexit. The reasons for this? Most believed being in the European Union made the UK more attractive to international investment and made the country as a whole more globally competitive.
Smaller tech firms, like us and many others, have been far more reserved in their judgements about how Brexit could impact the tech sector as a whole (and not just the big players). So, with Article 50 finally triggered by Theresa May following nine months of finger-twiddling, it seems only right to assess things for when we eventually do leave. One thing’s for sure, the next two years are likely to be far from plain sailing.
Impact on the channel
It’s widely suspected that fallout from Brexit could test relationships between vendors and their channel partners. However, if these relationships do change, it’s just as likely that it could be for the better. Vendors might choose to not have a UK base when we eventually leave the bloc, preferring instead to sell through channel partners or distributors to avoid any additional UK trade costs. Channel partners and distributors could therefore actually see a rise in activity as a result of Brexit.
However, international vendors could also be tasked with negotiating new contracts and arrangements, which could raise questions regarding the level of vendor support provided and the potential impact this could have on bottom lines.
The impact of Brexit on local distributors that do not operate on the continent is likely to be minimal, whereas larger distributors - which often have local presence in all major countries - could enjoy easier cross-border trading management.
Of course, the main concern here is the likelihood that contracts spanning the EU with vendors for some corporate resellers will need renegotiating not the easiest thing to do.
The issue of employment
Brexit’s impact on jobs, movement between countries and immigration formed some of the biggest debates leading up to the referendum, and it’s likely these issues will directly impact the tech sector. The debates of last year focused largely on levels of immigration to the UK, but what about the impact that any resulting reductions will have on the makeup of the country’s tech sector workforce?
It would be hard to deny that a fall in immigration and restrictions on free movement could prove detrimental for businesses that are reliant on recruiting individuals from the expansive EU talent pool.
Many tech companies rely on multilingual European sales staff to communicate and negotiate potential sales overseas. Their language skills and cultural savviness means businesses are able to communicate to more customers on an international scale across the globe. Smaller companies that rely on drawing the right skills from EU countries in order to support growth are also likely to suffer.
Consequences for stock and warehouses will also take hold once Britain leaves the European Union. It’s a widely held belief at the moment that many pan-EU resellers will actually encounter more red tape as a result of Brexit, with import/export licensing for sensitive technologies becoming increasingly difficult to navigate.
On the other hand, however, the UK will likely lead the way in changing to meet whatever new market conditions emerge.
The referendum caused a great deal of market uncertainty for many UK technology companies. These companies have had to continue to advance in the aftermath without knowing the long-term impact that Brexit will have. The drop in value of the pound has also been a major focus, particularly for those importing or exporting to the EU and other international markets. As we enter into a further period of uncertainty, confidence among UK tech firms is unsurprisingly low. However, the economy as a whole has fared incredibly well since 23rd June 2016, which could mean times may not be as tough as previously expected.
In the interim, life goes on, and the technology sector finds itself in the same boat as all UK businesses. Only time will tell how the sector contends with the challenges thrown its way as a consequence of Brexit, but we’re ready to face whatever comes our way.