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Comment: How will Brexit impact UK tech companies?

Added on the 31st Mar 2016 at 9:10 am
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Earlier this month a survey of 3,000 London tech industry insiders found that 87% were opposed to the idea of Britain leaving the EU. The views of Tech London Advocates members highlight fears that businesses in a post-Brexit UK would find it harder to reach customers in the rest of the EU, employ overseas talent and attract international companies to operate in the UK at scale.

Generating around £161bn for the UK economy and accounting for 1.46m jobs, there is no denying that tech is booming in the UK. But what would a pro-Brexit referendum decision mean for the UK tech sector?

Like much of the conversation surrounding the impact of Brexit on other sectors, it is uncertain how much Britain leaving the EU would affect the growth prospects of UK tech companies. Much of this uncertainty is due to the fact that it is not clear on what basis the UK would continue to trade with the EU. There are four broad possible options. Each of these possible outcomes could have a direct impact on growth – positive or negative – as each option affects UK tech companies’ access to specific markets and therefore their ability to compete on the world stage.

The four options for UK trade with the EU following Brexit are as follows:

  • the UK foregoes any specific relationship and simply treats the EU like any other potential source of trade, relying on the protections of international trade law via the World Trade Organisation;
  • the UK enters an ongoing customs union agreement with the EU, like that the EU has agreed with Turkey;
  • the UK signs free trade agreements with the EU, whether narrowed by specific business sector or broad for all trade like Switzerland’s; or
  • the UK rejoins the European Free Trade Association and so the European Economic Area (EEA), and retains access to the common market on the same basis as Norway, Iceland and Liechtenstein

While all of these options would have an effect on UK trade with Europe, it must not be forgotten that any agreement on how to trade requires consent from two parties. A post-Brexit UK relies not just on decisions made in the UK, but also on the EU accepting those proposals.

Proponents of Brexit argue that tech businesses, like all others in the UK, will benefit from being freed from the need to comply with additional laws which are passed at an EU level.  It’s also possible that leaving, and no longer having to ‘pay its dues’ to the EU fund would leave the UK government in a place where it could use some of those potential savings to reduce the tax burden on UK tech businesses.

Additionally, the ‘saved’ funds could be used for investing in UK tech, either via direct investment in UK companies, or indirectly through improvements to infrastructure, facilities and equipment to support growing UK businesses.

Lastly a standalone UK would have the option to redefine its immigration laws away from those mandated by Brussels, providing more opportunity to attract technologically skilled workers to the UK, perhaps through a system like the Australian Skilled Immigration Points scheme.

However, it remains to be seen whether such potential advantages outweigh the depth of UK trade to the rest of EU trade, and the import and export tariff free regime such trade enjoys.

Calum Murray is head of commercial technology at Kemp Little

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