Brexit will 'prove challenging' to UK universities and tech sector

Following the announcement on Friday that the country had voted in favour of leaving the EU, commentators have been assessing the impact on UK tech.

Going their separate ways - at what cost?
Going their separate ways - at what cost?

The outlook for the British tech industry including cyber-security is poor following the EU Referendum vote which resulted in the UK voting in favour of withdrawal, according to two leading research organisations.  

Meanwhile, the BCS has warned that sustained focus on universities will be required to prevent them being damaged by the Brexit vote.

The tech sector is worth 10 percent of UK GDP, according to Frost & Sullivan, and London is widely regarded as the tech capital of Europe. Brexit puts this in jeopardy, said Ajay Sule, practice director EIA, and Adrian Drodz, research director, Digital Transformation at Frost & Sullivan.

This viewpoint is supported by Forrester, a rival research organisation, which said the Brexit decision creates “short-term uncertainties and unintended consequences that will make it harder for UK businesses to keep customers and attract talent”.

Brexit ‘harms'

Brexit will damage British companies' ability to recruit and retain talented people because it will be more difficult to tap into the EU labour market. “In addition, EU citizens working in the high-tech sector may feel their careers are best served elsewhere – there's a real possibility that many will seek opportunities elsewhere in Europe,” said Frost & Sullivan's Sule and Drodz.

And according to Forrester's report, “London boasts one of the best talent pools in Europe. Uncertainty over the UK's future immigration laws (ie, who will have the right to stay) will both drive footloose talent to look for jobs abroad and dissuade others from coming, and firms will struggle with new and likely more difficult work visa regimes.”

Forrester said cross-border trade and customer service will suffer as companies which rely on quick deliveries to their clients spend more time wrestling with customs tariffs and costly paperwork such as certificates of origin.

Frost & Sullivan echoed this, asking if Brexit would cut red tape or just create more, highlighting data protection and privacy laws in particular. “Brexit may make it harder for companies to navigate legislation and ensure they abide with the varying rules in different countries,” it said. “Additionally, the EU has been driving policy on how US firms collect and manage user-data it collects from Europe and negotiated the ‘EU-US Privacy shield' agreement. With Brexit, the UK will not be a part of this agreement post 2018 and will need to negotiate new terms directly.”

The UK is seen as a digital hub on the edge of Europe, an attractive place to set up business by many US investors, said Sule and Drodz. “Start-ups have also been attracted by the culture of innovation fostered in London in particular. With such uncertainty, will major IT providers want to retain their European headquarters in the UK, or will the lure of operating within the EU work to the benefit of Paris, Frankfurt and others?” they said.

Financial services is an area where Britain excels but with Brexit, Forrester is predicting that the power will shift from London to other European financial centres. Frost & Sullivan say that this will have an impact on the tech sector, which includes cyber-security of course, because there will be less investment funding available.

In addition, it pointed out, the European Investment Fund is the largest investor in UK venture capital firms and it's unclear if this funding will remain in place and for how long.

Many other issues will come to the fore, as both companies said, including renegotiating cross-border contracts, differing treatment of intellectual property and patents and the movement of major manufacturing companies out of Britain, with a consequent loss in local support jobs such as IT and cyber-security.

Risky business  

Meanwhile, the BCS – the Chartered Institute for IT – warns that it will take sustained focus post-Brexit to maintain the UK's top position in global science and engineering.

Bill Mitchell, director of education at BCS, said that “advances in most basic and applied science and engineering are now achieved through close international collaboration”.

The BCS sees the universities as key to maintaining the UK's position in the world and notes that 20 of the top 200 universities in the world are British and, even more impressive given the relatively diminutive size of the country, it also lays claim to four of the top 10 places.

Brexit risks UK universities losing access to European research projects such as CERN (where British academic Sir Tim Berners-Lee invented the world-wide web) and the European Space Agency (ESA).

“The UK is taking a leap into the unknown. BCS will be doing its part to make sure we are a prosperous and internationally relevant nation, with an outstanding, world class education system and scientific research base, and that global corporations seek out the UK as the first choice for their research and development centres,” Mitchell said.

Supporters of the Brexit decision claim that these will be short-term disruptions and insist the economy will adjust in the long-term and ultimately enjoy faster and more robust growth.

Ilia Kolochenko, CEO & Founder of High-Tech Bridge, said the EU will be forced to cooperate with the UK because of the sheer size of its economy. Writing in an Opinion article on SCMagazineUK.com, Kolochenko said, “Taking into consideration that UK is the second largest EU economy (after Germany) and fifth largest global economy, continental Europe will have no other choice but to maintain close cooperation with it.”

He said countries such as Switzerland, Norway and Lichtenstein work closely with the EU without being members.