While Britain's tech industry has grown greatly between 2005 and 2015, it has been weakening due to significant financial losses following the BREXIT vote.
This post from Reportlinker highlights five ways Brexit could affect Britain’s tech industry.
In June, the citizens of Great Britain voted to leave the European Union, an action nicknamed Brexit. While the move has many political implications, it also affects business. Britain’s tech industry, for example, is expanding. Between 2005 and 2015, more international tech projects came to London than other major European cities combined, according to London and Partners. Meanwhile, since 2010, London’s digital technology sector has grown 46%, accounting for 3.5% of the city’s jobs, and between June 2014 and June 2015, seven London tech businesses reached $1 billion in valuation.
How will Brexit affect this booming industry? Here are five ways it could change:
- Startups struggle: Leaving the EU will make it harder for some startups to find talent. A large number of technology jobs are filled by foreigners because there aren’t enough Britons trained to take these positions. Tech companies might decide it’s better to locate on the continent instead of Britain to access this talent pool and avoid workers having to apply for visas. Brexit also will make it more difficult for startups to find venture capital. European Investment Fund Better Capital, the largest venture capitalist in the UK, stated before that the vote would probably stop the firm investing in the UK if the nation voted to leave the EU. Source: Tech City News, Tech Republic
- Shrinking profits: Microsoft, Google, Apple and Facebook all do business in the UK. These Silicon Valley giants saw profits shrink as currency changed value as a result of the Brexit vote. While the British pound sterling declined to a 31-year low, the U.S. dollar rose the fastest in 50 years. This has a three-pronged effect. First, billions in profits are lost due to the currency fluctuations, and property purchased in pounds becomes less valuable. Second, doing business with an American business may prove to be too expensive for many foreign companies and they’ll take their business elsewhere. Finally, UK businesses that sell mainly to the U.S. will see profits increase. Source: Tech Radar
- Loss of privacy: EU laws protect consumers and companies in a variety of ways including protecting intellectual property and data privacy. Laws also regulate trust and stipulate what types of information companies can collect. Traditionally, however, the UK has been more lenient, believing the EU’s laws are too strict. The UK also is more friendly to U.S. business than other European nations. After Brexit is complete, it is possible the EU will enact tariffs on goods imported from the UK, especially those originating in the U.S. In addition, Britain will have a new concern: How to store and protect data. The EU has, or is in the process of negotiating, regulations that protect European data. Once the UK leaves the EU, however, it will no longer be protected by these regulations. Source: Tech Radar, Times of India, Tech Republic
- Financial hits: Leaving the EU may mean higher tariffs and the loss of venture capital. It also means the loss of EU research grants, including the Digital Single Market Initiative. The EU funded $9.2 billion in UK tech businesses from 2007 to 2013, a $395 million gain annually for UK business. In the future, it means losing access to a $659 million planned network of European digital innovation hubs, and no longer being eligible for the European Cloud Initiative, a place for technology and science professions to store research data. In addition, 15% to 20% of the UK software market comes from the financial services sector. It’s unknown how changes in the economy will negatively affect this customer base. Source: Tech Republic, Lexology
- Uncertainty: Companies have no idea what to do next. Should they hold their ground and see what happens or leave the UK, perhaps too early and unnecessarily so. Uncertainty leads to customers purchasing less goods, employees wondering about the status of their jobs and companies wondering about the cost of business. “I would hate to be a company trying to decide whether or not to move to the Continent or to Ireland or stay in the UK,” Paul Saffo, technology forecaster and professor, told Tech Radar. Source: Tech Radar
Image: Delpixar (Getty Images)