What a no-deal Brexit could mean for the UK’s technology sector A no-deal Brexit is looming, and could spell grave uncertainty for many working in the UK’s tech industry

The UK is a hub of innovation with tech centres springing up from Glasgow to Bournemouth, and Facebook and Google setting up big offices in London. But how will a no-deal Brexit affect one of the country’s most promising industries?

Innovation

IT and technology experts have expressed concern over the implications of a non-deal on the country’s fledgling start-ups. Simon Hansford (inset), chief executive of UK cloud-hosting supplier UKCLOUD, told the Lords EU committee in February it was “the uncertainty that will kill us”, adding: “We have multiple multimillion-pound investment decisions that need to be made, but it depends on capital, certainty and access to people.”

Very few small and medium-sized enterprises have the money, resources or desire to invest in the unknown, he added, while Russ Shaw, founder of Tech London Advocates and Global Tech Advocates, told the committee that Brexit contingency planning is yet another factor start-ups are having to account for on top of the pressures of trying to kickstart a successful business. UK fintech (financial technology) companies will also lose the ability to trade across the EU – known as passporting rights.

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However, tech giants including Facebook, Snap and Google have expanded their teams in the UK in the wake of the UK’s exit from the European Union. Sundar Pichai, Google’s chief executive, said the company was “committed to the UK” at the opening of its north London headquarters in November 2016. Speaking in February last year, Tim Cook, Apple’s chief executive, has also declared the UK will be “just fine” post-Brexit.

Tech companies will also have the chance to develop relationships with the UK industry, independent of the EU. That said, Amazon’s UK boss Doug Gurr was reported to have claimed Britain will descend into “civil unrest” if it exits the EU without a trade deal.

Staffing

A no-deal Brexit spells uncertainty for EU citizens living and working in the UK, and UK residents living in other countries across Europe.

Around 8 per cent of workers in the UK’s tech sector hail from the EU and the restrictions imposed by the Tier 2 visa cap (which restricts the number of skilled workers applying for work in the country to 20,700 annually) prevents tech firms from recruiting new employees from outside the EU. The pipeline of UK tech talent is unlikely to meet demand, experts have warned.

“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,” says Karen Kaur, immigration specialist at immigration law firm Migrate UK.

“The UK and global technology industry is already in the grips of a major skills shortage. Foreign skilled IT workers whether from the EU, working in the UK or UK workers in the EU, feel uncertain over their future, causing a large proportion to return home or to work elsewhere.”

Hard Brexit could also lead to fewer new technology jobs across the UK, research commissioned by the Mayor of London Sadiq Khan’s office found in January. Even in the event of a two-year transition deal (following which the UK stayed in the European single market and customs union), there would be 36,000 fewer tech and science jobs in the UK, over 5,000 of which would be in London, it found.

Trade

The nature of the technology industry means it is more adaptive and flexible than others, Jass Sarai, PwC’s UK technology industry leader, said. A recent PwC report found tech firms were more likely to be positive about the potential effects of Brexit than other sectors.

“Technology companies are used to facing disruption, and are arguably more agile than most and less affected by new barriers to physical trade,” he added.

Funding

Funding for UK tech firms by the European Investment Fund (EIF) fell by 91 per cent during 2017 to €61.1m (£53m) compared with €708.8m the previous year. Tech investors claim the funding decreased in the wake of Article 50’s triggering. Backing from the European Investment Bank has also dried up.

Future funding is unlikely to be forthcoming from these institutions in the event of a hard Brexit, although UK tech companies have raked in more than £5bn in venture capital funding since the EU referendum – more than France, Sweden and Germany combined.

Data

Theresa May announced in March that the UK would be leaving the Digital Single Market in 2019, an EU-wide strategy adopted in May 2015 designed to encourage cross-border e-commerce, robust cyber security and reliable infrastructures. Instead, the UK would be granted an all-encompassing free-trade agreement, she said.

A lack of a Brexit deal would mean all free-trade agreements disappear into the ether and – perhaps more worryingly for tech companies on both sides of the Channel – any moves to secure data-sharing rights between the UK and the EU will be off the table, Dominic Zammit, head of digital at the Conran Design Group, said.

“While in the short­-term this may present an opportunity for players outside of the EU, the longer-term impact on innovation, as well as social and economic development, could be profound, not just within the UK, but worldwide,” he says.

However, the UK may be granted adequacy to continue sharing data throughout the EU, bolstered by its reputation as a world leader in data privacy.