Prior to the vote, UK tech start-ups were more or less unanimously in favour of remaining in the EU, now that it’s happened not one of the tech firms based in the UK think leaving the EU will be good for business. Following the vote, the Federation of German Start-ups were quick to declare that Berlin would emerge as a winner from ‘Brexit’, adding mournfully, ‘It is a victory we do not want and will not be celebrating’.
Few were spared in the immediate aftermath of the result, as global markets plummeted and apocalyptic headlines predicted destruction. As is often stated, no one knows exactly what’s going to happen, but one thing that is certain about uncertainty is that it’s bad for business. And those enthusiastic Brexiteers who tell that it’s all going to work out fine are seriously underestimating the bitterness and anger that this divisive vote has caused in Europe.
The UK is pinning all its hopes on being able to remain in the single market like other non EU countries such as Norway and Iceland but that would mean allowing freedom of movement for EU workers and therein lies the rub. Maybe nothing dramatic has happened yet, but clearly expansion plans are on hold as firms look at the prospect of relocation. Vodaphone, currently the 7th biggest company on the FTSE100, with 110,000 employees worldwide, 13,000 of whom are in the UK, has said it’ll leave the UK if the government can’t guarantee freedom of movement for people, capital and goods. It seems unlikely that this is an assurance that the UK government will be able to give anytime soon, if at all. Tech giants, Google, Amazon, Facebook and Microsoft are also considering their future post Brexit, and whether the UK is still the best place to invest. For a company like Partypoker there’s a further interesting dilemma, its organisation is based in Gibraltar, which, like London, voted overwhelmingly in favour of staying in the EU. What will be the status of Gibraltar in the new Europe? Can tech companies afford to stay in the UK with so much uncertainty? Here’s four reasons why not:
Access to skills– UK based ARM designs chips in 95% of smartphones, the future of their 200 EU employees, based at Cambridge is now in question.
Funding– Between 2007 and 2013 the EU funded 7 billion pounds of tech research.
Trade- The UK will have to renegotiate in excess of fifty free trade deals. In the mean-time it will have to deal with cripplingly high tariffs. The EU was designed to reduce trade difficulties, the UK now faces increased tariffs, border control and regulation.
The loss of the Digital Single Market – Even if the UK develops more tech friendly regulation, if the market fragments it will still be bad news for UK tech firms. US tech firms have difficulty processing the data of EU citizens because the EU has yet to declare the US a safe destination for European’s personal data. The UK will have to reform its privacy laws in line with the EU or face barriers to its cross border data flows.