Brexit and the tech sector - a glass half empty

Profile picture for user slauchlan By Stuart Lauchlan July 12, 2016
Summary:
In the wake of the Brexit vote, what are the threats and the opportunities to the tech sector? A techUK debate found that most of its expert panelists were in a decidedly glass half empty frame of mind, especially around immigration and data protection.
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Walker, Hanrahan-Soar and Boardman

Later today, in the wake of the Brexit vote last month, David Cameron steps down as Prime Minister to make way for Theresa May, the second female leader of the UK. While May was in the Remain camp, albeit tactically somewhat mutedly, she has made it clear that as she moves into Number 10 Downing Street:

Brexit means Brexit.

So despite social media getting into a lather yesterday about a Westminster debate on a second referendum being announced for September - one that will not result in a vote or change anything - the assumption remains that the UK is exiting the European Union (EU) and as such, decisions need to make based upon that scenario.

That was the backdrop to a debate hosted by UK technology trade association techUK yesterday, which kicked off with Deputy CEO Antony Walker telling attendees that he had accurately predicted the outcome of the referendum (down to the precise percentages) and that May would become PM. With that in mind, he claimed the credibility to state:

The UK will leave the EU before the next General Election.

That said, Walker gave himself some wiggle-room by noting that in light of the febrile events of the past few days on the UK political scene, he’s giving himself a caveat on that prediction. But, he argues, this is the reality in which the tech industry needs to operate for now and as such there are a number of key points that techUK wants to see factored into any negotiations with the EU. These are:

  • Open access to the EU Single Market. Walker’s view is that it’s unlikely that a Norwegian-style European Economic Area (EEA) arrangement will happen, but there needs to be as close a relationship as possible.
  • Open to best global talent. Walker’s view is that it’s most likely that a line will be drawn under free movement, so the tech sector needs to be involved in devising what he calls “a smart immigration system” that ensures that the best people can be sourced. People drive innovation, not tech, says Walker.
  • Open borderless world for data to enable trade to flow. That’s going to mean some form of GDPR (General Data Protection Regulation) equivalency. It’s also going to be big challenge for whatever Brexit negotiation unit emerges from May’s imminent ministerial appointments.
  • Open to investment, with the question being how to make the UK as or more attractive to external investment post-Brexit.
  • Open to collaboration. This is about stakeholders across the spectrum working together with an “all in this together” mindset to come up with differentiators for the UK to make the country, and the tech sector, distinctive from the EU.

Big task

Only five action points, but the practicalities involved render that a daunting to-do list. Certainly the majority of the participants in the techUK debate were of a decidedly glass-half-empty worldview. Vicky Price, Board Member at the Centre for Economics and Business Research, declared bluntly:

It’s not easy to find something optimistic to say. Who is the Brexit negotiator will matter a lot…Leaving the Single Market would be a catastrophe for the UK economy and the tech sector.

She added that when it comes to topics like devising a new immigration system, she is concerned that the task is huge:

What I really worry about is how you can get people who are completely involved in these negotiations to get to the finer points.

It’s going to be an enormous challenge, argued Naomi Hanrahan-Soar, Head of Policy and Knowledge Management at immigration law specialists Smith Stone Walters, admitting that she had a negative message if anyone thought that immigration won’t be a major sticking point in Brexit negotiations:

There is a huge amount of uncertainty and really only a few options. The European route [to immigration] comes with freedom of movement and that doesn’t seem likely. Immigration has been top of the agenda for the Leave campaign so it would be political suicide [not to pursue that].

She added there's a need for societal attitudes to change:

The places [in the UK] that voted for Leave had some of the lowest levels of integration [of immigrants]. The people who perceived migration to be an issue were in places with the lowest levels of migration. The more people interact with other people then the less scary the ‘other’ becomes.

One potential immigration model often cited is to shift to an Australian points-based system, but Hanrahan-Soar pointed out that this is already in place, having been introduced in 2008. But it differs from the Australian version as there is more intervention from government and experts Down Under.

So, for example, a decision is made that there is an immediate need for 20,000 maths teachers in particular regions of the country, so if you’re young and English-speaking and willing to teach maths in, for example, Canberra, you get extra points. But these requirements are regularly revisited and updated to meet changing needs.

In contrast, the UK version doesn’t change,  as the view is that there shouldn’t be too much dictation from government. It’s not good news for the tech industry in the UK, said Hanrahan-Soar, although she did add that the tech sector has been more open-minded than others:

Our clients outside of London who are trying to hire in migrants tend to be tech.

Given the current uncertainties, the best bet for the moment seems to be for organizations to secure British nationality for EU migrant workers. That in itself could be a challenge, although the weight of political opinion appears to favor legitimate resident EU migrants will not see a change of status.

The data dilemma

On the subject of access to data, Ruth Boardman, partner at law firm Bird & Bird, flagged up possible consequences of the UK being outside of the GDPR, which is due to kick in in 2018, almost certainly before Brexit is completed. She noted that the German authorities have long sought to use data protection principles as a trade barrier, while there are now Irish commentators saying that the Republic’s ability to receive data freely should make it the port of call for US firms coming into Europe, not the UK.

All of this is likely to lead to problems ahead, said Boardman:

We are already seeing clients asking us where they should put their data and we’re having to say, ‘Not the UK’ because there’s no certainty at the moment.

A number of US clients of mine are looking for contingency plans to re-architect their services to offer an entirely EU-ring-fenced service and we’re having to rule the UK out of that planning process.

The UK is going to have to find some form of GDPR equivalency, Boardman predicted, and not go down a laissez-faire route:

The answer to making the UK more attractive in a data-driven world is not to reduce EU data protection legislation. This is not pointless EU red tape, so reducing legislation is not a solution. This is not an EU dynamic. Look at Latin America, Asia Pacific, Africa - more and more places are adopting new data protection laws or strengthening existing ones, so that they can position their country as a safe recipient for global data.

Boardman’s view is that there is an easy way and a hard way to get around this:

The easy way to do it is if the UK becomes a member of the EEA, in which case we’d be deemed to be adequate. The hard way is to take the current Data Protection Act and try to boost it to address the new requirements in GDPR.

On the other hand, she conceded, the latter option would provide an opportunity to avoid parts of the GDPR requirements that are “unfortunate or unclear”. This might, presumably, include the odious Right To Be Forgotten, which the UK government has openly opposed. Every cloud and silver linings etc.

In part two of this report, there's an outbreak of Keep Calm and Carry On.