Brexit in the Channel

The countdown to Brexit has begun with Theresa May finally squeezing the Article 50 trigger. Rob Horgan speaks to the Channel about how Brexit is, already has and will impact the technology sector in the years to come.

IT’S OFFICIAL: Brexit has begun! A little over a month ago, Prime Minister Theresa May pulled the (now-infamous) Article 50 trigger, signalling the beginning of the end for the UK’s love-hate membership within the EU. Despite high-profile celebrities such as Richard Branson offloading his life savings (well some of them) in a last-ditch attempt to derail Brexit, we must now face up to the reality that it is actually happening. But what does that mean for the Channel and the technology industry as a whole?

Well, early signs show that the UK tech sector has actually grown since the EU referendum result last year (whether that is being driven by blind ignorance or economic defiance remains to be seen). In fact, in the eight-month period after the June vote, the number of UK tech start-ups has more than doubled (year-on-year) with 5,995 new firms listing with Companies House since Nigel Farage infamously declared UK’s ‘Independence Day’.

And despite 45 per cent of the tech industry’s workforce being made up of overseas workers (mainly from the EU), the sector has shown no signs of putting the brakes on. KPMG’s 2017 Global Technology Innovation report put the UK as the fourth most promising tech market, up three places since before the referendum took place.

Industry analysts are also seemingly unconcerned about the sector’s durability. Christian Stadler, a Professor of Strategic Management at Warwick Business School, said: “The UK’s tech industry is one of the biggest in the world and I expect a number of companies will be making big expansions in the UK. Brexit or no Brexit, the digital economy of the UK is great and its many advantages outweigh disadvantages.”

And a large number of Channel partners are singing from that very same song sheet, with optimism remaining at the forefront of the sector. Managing director of VIP, Rich Marsden, said that outside of currency fluctuations his firm has seen ‘no real change’ since Article 50 was triggered. “Demand has stayed in line with our expectations due to the dollar against GBP rising, so overall some positives to take from this period rather than negatives. It has been business as usual for us.”

He added: “I think it is a good thing for the supply chain as a whole, and we as an industry should not continue our race to the bottom. Brexit has helped establish pricing back at the level it should be.”

Equally buoyant, Claire Davenport, managing director at VoucherCodes.co.uk, believes that UK retailers will actually see an increase amount of spending in a post-Brexit UK. “More and more retailers are expanding internationally and this won’t change now Article 50 has been triggered,” she said. “Often customers are not even aware they are making an overseas purchase, meaning Brexit isn’t going to push them away.”

“Our hundred plus EU workers are increasingly more nervous now that Brexit has been triggered.”
Alex Tatham, Westcoast

However, others are not so optimistic and have begun putting measures in place to safeguard their business. CEO of the PPRO group Simon Black confirmed that he is looking to move more of his business to EU states to ensure the firm’s future. “In terms of Brexit-proofing our business model, we made an early decision last year to begin relocating our headquarters to Luxembourg to comply with EU regulations. This will cost us an additional £1m per year before the UK formally leaves the EU in having to maintain dual regulatory licences, setting up and running the Luxembourg office. But this is now a necessary cost.”

He continued: “A challenge facing the FinTech industry in particular, is how firms will navigate and comply with changes to license and regulatory requirements. Hence we are calling on Theresa May and the British Government to prioritise the retention of EU passporting rights or face a mass exodus.”

Westcoast is another company that expanded its business into Europe last year. CEO Alex Tatham described its purchase of Westcoast France as an ‘important factor’ to remaining fully integrated with trade inside the EU. Tatham also raised the issue of reassuring a large contingent of EU workers within his company that their jobs are secure. “Our hundred plus EU workers are increasingly more nervous,” he said. “Obviously we have reassured them but the government need to fix this issue urgently.”

He added: “The hardest thing is the uncertainty it causes the business community and undermines confidence. It is hard to be positive about anything in the IT channel as a result of Brexit. We are all trusting that deals on recruitment and trade are reached without harming the economy in Britain.”

While some firms are staying positive and others prepare for the worst, there are a large number who are waiting it out to see how things pan out before reacting. Ben Allcock, TP-Link director, said that he has seen ‘little evidence of reduced spending’ in the first quarter of the year and is holding tight for now. “From our perspective, it’s been a great start to the year so there’s no need to change tactics just yet. It’s fair to say we can expect some market volatility, but change of this magnitude can be considered to be an opportunity.”

Meanwhile, an added factor faces Scottish-based firm Utopia Computers. Boss Craig Hume explained: “The landscape between Brexit and another possible Scottish referendum is of course something we are monitoring closely. With challenges comes opportunities, and as a business we must see the positives in all situations.”

So, to put a long, complicated, political story into a neat conclusion: the tech industry is remaining strong and looks on track for a successful 2017. If Britain can negotiate trade and freedom of people deals with the EU quickly, then all should be OK. And if not, the industry looks ready to adapt (or failing that, jump ship and relocate).