If the UK referendum result shocked the world, it was also unwelcome news to the UK tech industry. Of all sectors, technology had been among the most anti-Brexit. So what impact could the referendum result have on the sector in the short to medium term?
Like all sectors, technology is affected by uncertainty. The UK’s departure from the European Union (EU) will involve a lot of negotiation on many detailed points. Will highly skilled EU nationals still be free to come and work for UK tech businesses? Will UK tech companies have access to the European Digital Single Market? Such questions won’t be answered quickly – perhaps not for several years. Amid such uncertainty, discretionary spending is likely to suffer, as customers put the brakes on replacing PCs, tablets and phones. Major IT infrastructure projects are also likely to be put on ice until the Brexit repercussions become clearer. No surprise that Gartner has warned that up to 5% may be wiped off previously expected spending on technology in the UK this year.
In the medium to longer term it’s possible some major tech firms currently located in the UK may relocate to an EU base, such as Berlin. EU tech start-up hubs could also become strong rivals to London’s Silicon Roundabout. Fintech firms may be particularly susceptible to a move if London loses its top ranking as the financial centre of Europe.
Don’t overlook the upsides
No one would call this good news, but the Brexit vote does come with some potential upsides. The weak pound makes investment in UK tech start-ups and growing businesses potentially more attractive to foreign backers. Several venture capitalist firms have publicly confirmed their ongoing commitment to the UK tech sector since the referendum. Meanwhile, some UK firms may be spurred into faster overseas expansion, helping them to grow more rapidly.
Can confidence be sustained?
Before the referendum, our research
found that 93% of tech Owner Managed Businesses (OMBs) were confident about the outlook for 2016, with tech respondents being significantly more confident than OMBs in other sectors about the year ahead. This translated into ambitious growth and development plans, with UK and international expansion on the cards.
These plans and ambitions won’t necessarily be abandoned following the Brexit vote. Many of the UK’s particular strengths, features that have made it a vibrant tech centre, will continue. The government is seen as committed to technology and innovation, so initiatives such as Tech City in London will be sustained. Home-grown UK talent in the tech sector is strong, fostered and encouraged by world class universities. UK consumers tend to be enthusiastic early adopters of new high-tech goods and services, making it an attractive market.
Time to pull together
Following the referendum result, Julian David, CEO of trade body techUK, issued a rallying call
to tech companies to come together and speak with one voice to ensure their needs are understood. He said: “To succeed, the UK Tech sector needs great people, great infrastructure, world-class science and research, unfettered access to global markets, and a world-class smart and predictable regulatory environment. Without the benefits of EU membership, the UK needs to be at its very best to succeed.”
Tech companies, their advisers and industry commentators will all be watching Brexit developments closely. In the meantime, business must go on. Planning for uncertainty is part of entrepreneurial life, and innovative sectors such as technology should be used to unexpected results. Brexit may be an unwelcome outcome for most UK tech businesses, but it may yet bring new and unexpected opportunities.