Brexit will hit job growth in the digital technologies sector harder than in any other sector of the economy, a forecast commissioned by City Hall has revealed.
A total of 32,000 digital technology jobs will be lost by 2030 if the UK leaves the EU on World Trade Organisation terms without a transition period, researchers estimate.
Softer Brexit scenarios are also likely to strike the digital technologies sector hardest. When researchers compared growth rates based on continued membership of the single market and customs unions with a departure from the latter but not the former, employment was forecast to be 1.3 per cent lower by 2030.
The financial and professional services sector is predicted to experience a greater decline in the total number of jobs in a no-deal scenario by 2030 (119,000), but only because it is a significantly bigger employer than the digital technologies sector.
The research, conducted by Cambridge Econometrics, also paints a bleak picture for the tech sector in terms of economic output after Brexit. Unless the UK retains membership of the single market and customs union, the tech sector’s gross value added score is predicted to fall faster than for any sector other than construction.
The “main issue” facing the science and technology sector, which incorporates life science and healthcare as well as digital technologies, is the lack of access to funds, the researchers note. The sector has benefited from almost €1.4bn of EU funding since 2014. “The UK receives almost 16% of all EU science funding from the European Research Council (ERC),” the authors state, “compared to the 12 per cent contribution it makes to the overall EU budget.”
London retained its title as tech funding capital of Europe last year, despite fears that Brexit would put off investors. But the UK’s departure from the EU is likely to lead to entrepreneurs and investors being denied access to the biggest source of funding in Europe. According to the Financial Times, the European Investment Fund accounts for a third of investment in UK venture capital funds. The government has pledged to create a new National Investment Fund in a bid to preempt the loss of funding.
Giles Derrington, head of Brexit policy at TechUK, told NS Tech that the Mayor of London’s report showed continued open access to markets, capital and talent will be “crucial components of a successful final deal”.
“This report provides more evidence to support TechUK’s call for rapid progress on a transition agreement that will allow time for a comprehensive trade deal to be put in place,” he said. “A chaotic exit from the EU would be highly damaging for tech companies in both the UK and across the EU. No one in tech sees that as a good outcome. It is therefore vital that progress is made on securing a transition agreement in the first few months of this year.”
Across every sector, the report indicates that 500,000 jobs would be lost if the UK left the EU on WTO terms without a transition period. Sadiq Khan, the Mayor of London and an outspoken critic of Brexit, said the report illustrated why the government should change its approach and negotiate a deal that enables continued membership of the single market and customs union.
Khan commissioned the report in December days after Brexit secretary David Davis said the government’s Brexit impact assessments did not exist, despite claiming in June that nearly 60 sectors had been assessed.
Khan said: “I’ve released these impact assessments because the British people and our businesses have a right to know the likely impact on their lives and personal finances.”
Theresa May told City leaders yesterday that she wanted to secure a bespoke deal that would prioritise the financial services sector, rather than retain membership of the single market. The government has until 27 October to agree a future trade relationship with the EU.