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Brexit Technology Ecosystem UK Economy

Brexit Implications on the Technology Sector

The UK technology industry has been a long-standing prominent area in the UK economy, that has experienced consistent growth for years. It is at the heart of the UK economy and it underpins practically every sector from manufacturing to medical. However, like every other industry Brexit will have ramifications to the sector, but just how much? 

Industry Outlook

The UK has one of the largest technology ecosystems, consisting of thousands of start-ups and even more products and solutions. A real driving factor behind the prominence of the sector is the strong entrepreneurial spirit, with new entrants entering the field each week with amazing concepts and ideas. The UK has been an attractive location for start-ups due to the strong focus on nurturing innovation with hubs located all across the country. Aside from this, there is a huge drive in investment, with the UK being one of the leading locations globally for technology investment. 

Innovation & Growth Hubs

Whilst London and the surrounding areas still hold the lead when it comes to digital tech turnover, other regions are quick on their heels. The likes of Birmingham, Bristol, Manchester, Edinburgh and Leeds are growing at a rapid pace both in terms and investment and revenue. Each of these locations is moving to the forefront of cutting-edge technology. 

2020; The Year of Tech

With the pandemic fast-tracking remote working and online use in general, the sector propelled to another realm. 

Did you know: The digital technology industry grew six times faster than any other sector in the UK in 2019.

Whilst many sectors faced hardship last year, the tech sector excelled. Predictions in 2019 were already forecasting strong growth for the sector, but even those predictions were wide of the mark from the actual results. No one could have foreseen a pandemic that would propel us at warp speed towards a working from home culture and a digital transformation of our lives. In terms of the original forecasts, we have time travelled ahead and are already in 2025. Whilst overall the sector experienced exaggerated growth, it was not evenly distributed across all of the sub-sectors. As you may already know, video call software and streaming services experienced unprecedented growth, but the likes of IoT, BigTech, EdTech, electrification of cars and AI also grew at a lighting-speed pace. However, at the other end of the spectrum, semiconductors and hardware faced declines, but a lot of this can be attributed to the drops in production and exports. 

Brexit Implications

The tech sector put up a resilient response to a turbulent year, demonstrating the expertise and innovation that is driving this area. Whilst they have overcome this past year, the tech sector is now facing another unknown, Brexit. Even though we know what the agreements are, both those in the sector and external analysts are unsure what the full impact will be. 

Britain has become a hub for innovation, fighting to become the technology leader of Europe. The sector receives investment from all over the world, including Europe and has many start-ups spinning out on Universities, in addition to overseas expertise coming to the UK. Brexit could throw a spanner in the works for this thriving community. 

Investment

Technology experts have been particularly concerned about Brexit’s impact on international venture capital (VC) and private equity (PE). In the past, the UK has received a substantial amount of investment from the European Investment Bank, which since the EU referendum has reduced their investment by two-thirds.

Did you know: London received $10.5 billion investment, more than any other European city.

However, the UK has been leading the way in terms of investment for many years, surpassing both France and Germany and in 2019, the UK reached a record high for VC investment, surging 44% from the previous year and these funds were predominately from the US and Asia, demonstrating the potential to widen the scope when it comes to investment and not needing to be reliant on the EU.

The data shows resilience in the sector and displays the ability to thrive in the future. 

Tech Talent Pipeline

The loss of the free movement of people could have serious impacts on the technology sector’s talent pool, which is already under-resourced, with more job opportunities than there are skilled workers to fill those roles.  

Did you know: around 8% of workers in the UK tech sector hail from the EU.

Those already working and living in the UK will be eligible for the settlement scheme to maintain their position and continue to live in the UK. However, in terms of sourcing new talent internationally in the future, the rules have now changed, EU citizens moving to the UK to work will need a visa in advance and employers will need a sponsor licence to hire workers from outside the UK.

Data Adequacy

Previously data has been openly shared (including personal data) between the UK and other European countries, with the UK’s departure the question if this will remain is still up in the air. Currently, the UK is in a transition period for the next six months to determine if the UK’s data protection standard is equivalent to the EU’s. When we left the EU, we also exited the EU’s GDPR realm, therefore new mechanisms need to be set up to regulate data flows. The right type of agreement could see them recognise the UK standards, granting the country a special status called adequacy.  

Importing & Exporting

The current trade agreement eliminates tariffs and quotas, meaning businesses will not be charged when moving goods between the UK and EU. Whilst this trade agreement removes charges, it does not remove all trade barriers such as checks paperwork and extra regulatory processes that need to be undertaken to place a product on the market. This is especially important for those dealing with physical products such as specialist technical hardware and electronics. 

What does the future hold?

The growth in the technology sector will be driven by transformation, innovation and remaining relevant and to maximise this growth, businesses need to be agile to tackle any challenges that come their way. We’ve already seen amazing innovation and creativity from tech firms in response to the pandemic and research found that more than 80% of UK tech businesses were looking to spend more on innovation as a result.  


Whilst we may not have a crystal ball, we can foresee that from the past performance of the sector that it will continue to thrive and evolve in the face of any challenges. 

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