We heard this week about the UK and Europe’s unicorn companies valued at $1 billion or more, with several since 2000 achieving that all-important exit.
But today’s big exit is, of course, the UK itself as huge swathes of the country ‘ignored the experts’ and voted for Britain to leave the EU. Brexit, Britain’s dramatic exit.
Typically positioning itself as apolitical, as long as it gets freedom to grow, the tech industry from multinationals to startups largely abandoned this to come out in favour of Bremain.
The protests went unheard. So here’s what could happen next for UK tech.
James Dyson, one of few brave Brexiteers, actually argued recently that leaving would make it easier to trade beyond Europe, which is where he already sells most of his wares.
But it’s not exactly easy, if you aren’t the UK’s biggest hoover maker, to change up your export strategy.
The EU makes up almost half of all our exports right now, a full 15 per cent of our GDP, which is a huge chunk of change representing £223 billion of goods last year.
We actually buy five-times more stuff from Europe than it buys from us, which leavers think gives us a good position to negotiate. Unfortunately a greater share of our GDP relies on Europe buying from us, so… jury’s out.
Digital Single Market
The DSM is designed to harmonise the trading of digital goods and services across borders, as well as ironing out different rules for web governance. The internet is without borders, after all.
The wide-ranging plans have been criticised almost as much as they’ve been welcomed, but it’ll be a pain in the arse to untangle ourselves from this, only to have to plug our stupid British plug right back in again.
One big part of the DSM is the impending General Data Protection Regulations, designed to create a single set of robust rules for the transfer of customer data.
Most companies in the UK should have already started working to implement this ahead of the 2018 deadline, so this throws a bit of a spanner in the works.
The Information Commissioner’s Office has now confirmed:
“The Data Protection Act remains the law of the land irrespective of the referendum result.
“If the UK is not part of the EU, then upcoming EU reforms to data protection law would not directly apply to the UK.
“But if the UK wants to trade with the Single Market on equal terms we would have to prove ‘adequacy’ – in other words UK data protection standards would have to be equivalent to the EU’s General Data Protection Regulation framework starting in 2018.”
For individuals, and in light of the likely passage of the highly controversial Investigatory Powers Bill in the UK, people could well be more vulnerable to government snooping.
Companies like Amazon and IBM have already got data centres based in Europe ahead of changes to transfer regulations following issues around the Safe Harbor agreement.
This might mean that companies are increasingly forced to choose mainland Europe for these data centre sites over the UK, if they haven’t already.
Any UK-based companies could also be made to host European data on EU soil, with the likes of AWS in Germany an obvious choice, unless we come to a new agreement.
There have been several warnings from cyber security surveys floating around online in recent weeks.
But Trend Micro’s global VP of cyber security research, Rik Ferguson, who also sites on Europol’s internet security advisory group, told NS Tech he isn’t too worried.
“We don’t perceive it as making an concrete difference to any cooperation that happens. Europol is made up of European police forces but also works with the FSB in Russia and more widely Interpol. There’s nothing to stop it having ongoing relationships with UK police forces.”
Microsoft’s chief executive in the UK, Michel Van der Bel said in an open letter to staff last month:
“Historically, the UK being part of the EU has been one of several important criteria that make it one of the most attractive places in Europe for the range of investments we have made.”
This might well not continue depending on how things change. But so far, so bad.
Today I have been told at least 3 UK startups lost deals from EU-based investors because funding was conditional on Remain to win.
— Mike Butcher MBE (@mikebutcher) June 24, 2016
Word on the grapevine is that many tech are exploring the potential for opening new offices in mainland Europe should the worst happen.
Now that it has, predictions that Google and Amazon will be among the companies that opt to halt investment in office space in London could well make sense.
Berlin or Dublin are likely top of the list for startups, with Frankfurt no doubt eyeing its potential to be Europe’s new, undisputed financial leader.
Morgan Stanley sources tell BBC: begun process of moving 2,000 London-based investment banking staff to Dublin or Frankfurt.
— Michael Savage (@michaelsavage) June 24, 2016
If you’re in need of a quick fix, there’s always Estonia’s e-Residency, which offers the option to remotely set up a legit EU company.
This could, optimistically, be our big chance to skill up parts of the British workforce that have been left behind in recent years, one of the big contributors to the Leave vote.
But Ronan Dunne, CEO of Telefonica UK, said earlier this month:
“To put that in some context, in order to capitalise on the opportunity promised by the digital economy, UK businesses need an additional 2.3 million digitally skilled workers by 2020 — a tough ask of a Britain on the outside.”
It’s not clear yet if European workers and, indeed students, will have to leave and when but London’s tech sector certainly relies on their work.
“I want to send a clear message to every European resident living in London – you are very welcome here. As a city, we are grateful for the enormous contribution you make, and that will not change as a result of this referendum.
“There are nearly one million European citizens living in London today, and they bring huge benefits to our city – working hard, paying taxes, working in our public services and contributing to our civic and cultural life.
“We all have a responsibility to now seek to heal the divisions that have emerged throughout this campaign – and to focus on what unites us, rather than that which divides us.”
The European Universities Association, meanwhile, has warned that it is “very concerned about the insecurity this causes, notably with regard to the participation of British universities in the EU funding programmes as well as the long-term consequences for European cooperation in research and education”.
Although the news of Brexit feels like it took many by surprise, the true fallout after the immediate jolts in the financial markets will take some time to reveal itself.
From a tech perspective, there are many regulations that we’ll almost certainly have to plug back into if we want to continue to trade with our closest neighbours.
There are huge questions about whether we’ll be able to attract the same level of investment and talent if we’re no longer a country that’s welcoming to people from the rest of the world.
A very sad day for many, although, take comfort in the fact we can still compete in Eurovision.
— Eurovision (@Eurovision) June 24, 2016
Aside from that, this is only really a great new dawn for Britain’s legal profession.