How Will Brexit Affect Technology Companies

There has been much in the news concerning the after effects of the UK leaving the European Union. It can be difficult to get a straight answer when the opposing factions for the Brexit debate are more interested in soundbites and personal rivalries than hard facts. The question for many technology companies is what will the landscape look like if we do decide to withdraw from the EU when that vote takes place in June.

A recent poll by the Bertelsmann Foundation based in Germany found that 80% of firms wanted to stay in the EU and that nearly a third would consider either cutting down their UK based capacity or relocating if we came out. This rose to 41% for technology and IT outfits. Despite the claims of many small businesses that EU regulations stifle their development and ability to grow, the overwhelming view according to the poll is that we should be staying in the union and fighting our cause from within.

This conflicts with other research highlighted recently on IDG Connect which said:

“Polling by Perspective Research Services in August 2015 found that, by 2:1, SME leaders think the EU is ahindrance rather than a help to their business. More than 70% of SMEs want the British Government rather than the EU in charge of employment law, health and safety, and trade negotiations.”

There are a number of scenarios that could take place if we were to exit the European Union. First of all, there would be a fairly lengthy period of uncertainty which could damage the technology sector in the UK. It may prevent trade deals from being re-forged and drive up the cost of doing business with the EU.On the other hand, it could also release many UK firms from the cumbersome regulation they are tied to at the moment.

 

The Best Case Scenario

If Britain exited the EU over the next couple of years, it would urgently need to renegotiate trade deals with countries like France, Germany and Spain so that there was as little disruption as possible. We would also need to forge new links outside Europe. To bring benefits, there would have to be a cut in the amount of red tape, something that might prove difficult if the EU digs its heels in.

In the longer term this could see Britain having access to more free trade, allowing it to take more advantage of growing markets such as Asia. For technology firms this will undoubtedly be a tough period and the most important question may be not whether a Brexit is good for Britain but whether the government can competently handle the changeover.

 

The Worst Case Scenario

Loosing vital benefits such as the right to free movement and having to renegotiate deals with European countries could cause major problems. In the worst case scenario trading would be much more difficult and technology companies will be deeply affected by this. Those who believe in the EU, despite its failings, say that trade agreements are not likely to be as favourable when we come out on the other side.

This could lead to a recession and difficult times for all businesses as they look to find other locations to sell their goods or services. It’s not just the EU that is going to be the problem. If you are a country like the US or China, who are you going to prioritise your deals with? A small country such as the UK or a major block with 500 million people like the EU? There is also the question of whether leaving the EU would free up the red tape or create more over the long term as different agreements are reached with different countries.

The truth is that technology companies and other businesses are all being affected right now by the possibility of a Brexit. Not only have sterling levels fallen but companies are having to invest large amounts of money to prepare for a possible exit. What the future offers, if we do indeed cut ourselves off from the EU, is far from certain. For tech companies a Brexit could be a liberating experience enabling them to build strong new relationships in an increasingly complex marketplace. Or it could inhibit growth, create more red tape and damage the tech economy for a long time to come.

The problem is, no one currently seems to have the right answers.

Links:

Bertelsmann Foundaton: http://www.theguardian.com/politics/2016/feb/14/eu-referendum-poll-1-in-3-firms-leave-uk-brexit

IDG Connect: http://www.idgconnect.com/blog-abstract/13152/-brexit-the-tech

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