How will a hard Brexit will impact the IT and Telecommunications Sector?

The political tide is turning towards a no deal Brexit which will have significant consequences for the tech sector in the UK. This spells disaster for a thriving industry within the UK where there are technological hubs springing up across the UK and Northern Ireland. With the UK panning out to crash out of Europe there will be significant problems in store for the tech industry as a result.

Firstly, for SME’s in general a hard Brexit will leave them exposed to higher interest rate loans which will affect plans for expansion. In a presentation to the House of Lords EU committee, Simon Hansford told the committee “We have multiple multimillion-pound investment decisions that need to be made, but it depends on capital, certainty and access to people.”

Lack of certainty strangling business

Every industry thrives on having certainty and as Steve Brazier, CEO at analyst Canalys, told Channels Forum 2018 attendees: “Nobody has a clue today what’s going to happen and it’s only six months away.” Uncertainty is the biggest problem for business both now and in the future. Businesses will not invest in staff or new projects and this is having a knock on effect on the IT industry and they themselves are in a similar position and do not want to upscale their business due to uncertainty. Business management is all about risk management and minimising risks. Therefore, to minimise the risks businesses will simply maintain their status quo and keep their business ticking over without any expansion. If there was certainty, multi million pound projects would be coming down the line and the IT industry would be set to benefit dramatically with an increase in new business and current.

Fear of recession

One of the fears for business generally is a fall back into recession when we exit the EU and this would have a disastrous impact on the IT sector. As a result, business people are battening down the hatches and trying to build up cash reserves so they have the resources to tide them over should such an economic crash occur. The fear of recession is stunting growth and in itself is causing economic shrinkage because businesses don’t want to take the unnecessary risk of expansions in case they find themselves in a slow growing economy.

Fintech industry

When we leave the EU the UK fintech industry will be negatively impacted by a hard Brexit because they will immediately lose the ability to trade across Europe and will have no passporting rights to do so.  There will also be implications in terms of data sharing and storage should the UK crash out of the EU. All moves to secure data sharing rights which could have a profound impact not only on the UK but globally.

Facebook Google and Larger tech

Large multinational companies like Facebook and Google have implemented contingency plans. They are at a major advantage in that they are large enough to create contingency funds to mitigate the risks of a hard Brexit. Sundar Pichai chief executive of Google has said that Google is committed to the UK when it first opened its HQ in 2016. However, small and medium sized enterprises will really struggle due to the uncertainty which has already resulted never mind the uncertainty around the measures that will be in place following Brexit on March 29th 2019. Amazon’s UK boss Doug Gurr was also less optimistic when he said the UK would descend into “civil unrest” if it there is a hard Brexit.

Employees

A hard Brexit is already impacting those people who are EU citizens. Free movement of people is a vital component in the tech industry because expertise is also largely dependent on the ability to draft human resources in from European countries. With 8 % of the UKs tech sector coming from EU countries, the introduction of Tier 2 restrictions on the number of skilled people coming into the UK =annually will have a very negative impact on the UK’s tech sector and its ability to meet demands in terms of skilled workers. The UK simply does not have enough skilled IT professionals to keep the industry going. Karen Kaur from Migration UK has said “without the scope for compromise and the added Tier 2 visa cap restricting talent based on salary as oppose to skill set, emigration from the UK will continue, resulting in a shortfall of talent acquisition and potential risk to the future innovation of UK and global technology sectors, on whom this society relies so heavily”. Tech companies are already finding it difficult to recruit the right skilled people to work in the industry and universities and retraining schemes are just not at capacity to provide these skilled workers. The major of London’s office commissioned a report on Brexit and has estimate that there will be a shrinkage in tech jobs of around 36,000 in science and technology jobs in the UK.

Expensive parts and higher costs

Many hardware parts are imported from the EU, so this will mean that parts may become dearer and maybe subject to high tariffs. Craig Booth, Acer’s UK country manager has said of Brexit “we are preparing for the worst”. He also mooted fears that prices will rise, which will also stifle economic growth and point to recession.  “It is reasonable to assume that we’ll have to prepare for an immediate to mid-term impact on the currency that will lead to price rises which will then cause the market to contract.” Market contraction could very well lead to a long hard recession which singlehandedly Britain will find difficult to climb out of once it leaves the UK.

A hard Brexit spells a bleak picture for industry

Overall the picture for the UK’s tech industry in the run up to Brexit and in the event of a hard Brexit is bleak. Should a softer Brexit be in the mix, then the picture obviously looks brighter and brighter still if article 50 is delayed or revoked and the UK remains within the EU. Ether way though, it’s vital that certainty is provided to businesses as they will require this if they are to make cogent decisions regarding their future and if they are to make plans for expansion. The entire future of industry in general is weighted in the blame and certainty is vital for all industries to make plans and move forward with growth. Given that the government has delayed the meaningful vote and that support for the current desl is not guaranteed, we are a long way off having anything like the certainty that businesses need for expansion and investment.

 

Please follow and like us:
0