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You are here: Home / Customer Data / Tech Sector May Suffer from Brexit
How Will Brexit Affect the Tech Industry as the U.K. Leaves the EU?
How Will Brexit Affect the Tech Industry as the U.K. Leaves the EU?
By Jef Cozza / CRM Daily Like this on Facebook Tweet this Link thison Linkedin Link this on Google Plus
Yesterday’s historic decision by British voters to leave the European Union (EU) is already sending shockwaves throughout global markets and the international business community. While British and European citizens and companies will be most affected by the decision, the U.K.’s exit is also likely to create major problems for the global technology industry.

"Likely” because the truth is, nobody knows for certain what will happen. No nation in the EU’s history has ever opted to abandon the union, putting the world in truly uncharted waters today. At the very least, the seismic shift in the political status quo will lead to years of uncertainty.

Loss of Tech Talent

While U.K. voters chose to leave the EU by a 52-48 margin, the U.K.’s tech industry was overwhelmingly in favor of staying. Three-quarters of British startups opposed the decision to leave, saying that leaving the union will likely reduce the amount of funding British tech startups can expect to receive from U.S. investors, according to a study by Silicon Valley Bank.

The decision to leave the EU also throws much of the U.K.’s technology industry into limbo. At the moment, EU nationals have the right to live and work freely in the U.K., allowing the continent’s top tech talent to work anywhere they want. The EU’s freedom of movement rule has allowed London to establish itself as the region’s most important technology hub.

While it is possible that Britain will be able to come to some sort of agreement with the EU to maintain freedom of movement, such a deal is far from certain. Much of the original impetus for the Brexit (British exit) referendum stemmed from the fears of British voters that too many EU nationals were immigrating to the U.K. That skepticism toward immigrant labor is unlikely to disappear.

Regulatory Uncertainty

Access to financial capital and tech talent are just two of the problems the British tech sector is likely to face now. The status of Europe’s Internet regulations has also now been thrown into disarray. Since the U.K. will be a non-EU country, British tech companies will now find themselves in the same position as U.S. tech companies, such as Google and Facebook, that have run afoul of EU digital consumer privacy laws.

While Britain has been able to push back against such regulations as part of the EU’s decision-making apparatus, it will now find itself without a voice in crafting future privacy and consumer protection legislation. And British technology companies may soon have to comply with two sets of regulations when it comes to consumer data: one for the U.K. and one for the rest of Europe.

But the bigger problem for the global technology sector may be the length of the Brexit process. The British government still has to formerly invoke Article 50 of the EU’s constitution to formerly begin the exit process. From there, negotiations between the U.K. and EU are likely to drag on for at least two years, if not longer. Any agreement will have to be approved by the 27 countries remaining in the EU.

The prospect of years of continued uncertainty will make decisions on hiring, capital investment, and expansion difficult in the extreme. Many businesses will cancel or delay decisions to invest in technology infrastructure until they have a clearer idea of what will happen in the long term. They’re also more likely to delay hiring decisions until the question of EU worker rights has been addressed.

While the Brexit is already having a major impact on major areas of the world economy, the interdependent nature of the tech industry makes it particularly vulnerable to the political uncertainty and regulatory chaos such an event can unleash. The world’s tech companies are now destined to operate in very interesting times.

Image credit: iStock/Artist's concept.

Tell Us What You Think


Posted: 2016-06-25 @ 1:26pm PT
Thank you for a thoughtful assessment. It's sobering to think the power of the people squandered their entire cache for a cheap night out. I guess the glass half-empty or half-full now has no bottom. The UnUnited Kingdom what will it become?

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