The Brexit Effect: 8 Ways Tech Will Feel The Pain - InformationWeek
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6/26/2016
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The Brexit Effect: 8 Ways Tech Will Feel The Pain

Brexit -- the vote by the UK to exit the European Union -- will have far-reaching impact on the enterprise tech business, not only in Europe and the UK, but also in the US and Asia for companies doing business in the region.
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(Image: Alex Slobodkin/iStockphoto)

(Image: Alex Slobodkin/iStockphoto)

BARCELONA -- The UK decided to leave the European Union in a landmark vote conducted June 23. Despite last-minute appeals to remain from leaders in the UK, Europe, and elsewhere around the world, British citizens voted 51.9 % to 48.1% in favor of "Brexit," as leaving the EU became known. In the wake of the vote, British Prime Minister David Cameron announced his resignation, which will take effect in October.

Most of the business and tech communities in the UK supported the "Remain" campaign, as did well-respected academics, artists, politicians, and scientists. Still, many voters saw the EU as a source of unwanted immigration and burdensome regulations, and considered it a costly club to be a member of.

While it will take at least two years for the UK to formally leave the EU, consequences of the Brexit vote were felt immediately in financial markets, and the tech community can expect to face considerable challenges in the months and years ahead.

The next steps for the UK and EU involve working out what Hollywood stars might call a "conscious uncoupling." One option for the UK could be a membership in the European Economic Area (known as the Norway option). But Brexit supporters will probably reject that option, since it grants EU citizens the same rights to move to the UK -- one of the main arguments used for leaving the block.

Many EU leaders, including the President of the European Commission, have shown their disappointment, and some asked the UK to leave immediately, saying that there will be no negotiations. As the drama unfolds, here are eight ways Brexit will affect the tech sector -- and the enterprises that rely on technology for their businesses (read: all of us).

Once you've reviewed the anticipated effects, tell us your thoughts in the comments section below. Are there ways in which Brexit could benefit tech companies? What other potentially negative results do you envision? How will the vote influence your company's decisions about doing business in the UK?

Pablo Valerio has been in the IT industry for 25+ years, mostly working for American companies in Europe. Over the years he has developed channels, established operations, and served as European general manager for several companies. While primarily based in Spain, he has ... View Full Bio

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moarsauce123
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moarsauce123,
User Rank: Ninja
7/3/2016 | 7:42:27 AM
Reckless decision
The Brexit was a reckless decision by misguided and uninformed blokes who want the Empire back. Now the anti-European right wing nationalists backtrack on all the promises they made claiming they never said any of that.

I think the UK needs to the EU more than the other way around. Investment will dry up, especially when the exit gets dragged out as it currently seems to be the case. Cost of living and cost of doing business will increase. Yes, foreigners will no longer have an easy access to the labour market, but once the foreigners are bullied out (violent attacks against foreigners tripled in the past week in the UK!) the jobs will be cut entirely. It is not that the English and Welsh get more jobs to chose from. And even if they do, competition for talent will be much stronger and drive salary costs up. Good for those who get hired, but bad for everybody else.

Also, on many construction sites in continental Europe British tile and brick layers are common. They do excellent work and ask less in salary as others. Eastern Europeans might be cheaper, but they lack the skills.

Especially the young generation will lose a lot of opportunities and they may just leave Small Britain (after Scotland declares independence and Northern Ireland joins the Republic) for good, which makes it even more difficult to operate. Then again, they were mainly absent from the vote, so they had their chance to speak up and blew it.

The EU needs to force a fast exit and be as tough as nails when it comes to negotiations. The only option to rescue the EU is to make it quite clear what the cost will be for leaving the union. My guess is that the UK will exit the EU and right away apply for membership again....if the Britsh voters throw out their entire dysfunctional two party system. We see it in the US that the "with us or against us" approach is the sure ticket for total standstill.
EdwardI220
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EdwardI220,
User Rank: Apprentice
6/30/2016 | 8:59:35 AM
US has required visas for decades
We've required visas for decades.  The question is, how effective will it be?
Whoopty
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Whoopty,
User Rank: Ninja
6/28/2016 | 7:46:35 AM
Re: Tech and The Implications of Brexit
Agreed, but I think that's because no one really knows how it's going to work. Will Scotland leave the UK? Will the politicians even honour the referendum in the first place? Will the EU force the UK out to try and reassert dominance?

And none of that even factors in the economic fall out that's taking place because of all this. It's pretty crazy.
vnewman2
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vnewman2,
User Rank: Ninja
6/27/2016 | 7:04:44 PM
Re: Tech and The Implications of Brexit
I don't think anyone - including those involved - is prepared for the series of events about to take place.
Whoopty
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Whoopty,
User Rank: Ninja
6/27/2016 | 8:21:24 AM
Re: Tech and The Implications of Brexit
I think this is going to be an interesting part of the process. Uk politicians seem comitted to taking a slow road to leaving, only getting the ball rolling after Cameron steps down officially. However the EU politicians want the UK to hurry it up.

I wonder who will win out.
Pablo Valerio
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Pablo Valerio,
User Rank: Ninja
6/27/2016 | 5:11:29 AM
Re: I may just be a dumb Yank, but...
@Joe, thank you for your comments. Sorry it took me so long to answer but you raised very interesting questions.

Here is my take (my comments in bold):

For my own part, I have my respectful rebuttals to those fears (which I recognize that you are merely listing and might be but are not necessarily adopting). Addressing this slide by slide:

#1: Yes, when you have to pay more for skilled local labor instead of "insourcing" through cheap migrant programs where you can pay people pennies on the dollar, I suppose that does technically qualify as a "difficulty." (q.v. H1B visas) tl;dr: Boo hoo.


Highly skilled workers from other EU countries in the UK and vice versa are not cheap labor imported from Asia, they are well paid and compensated equally. It will make more difficult for companies to have people move to other countries to work on specific projects, as they will need working permits.


#2: The EU needs the UK more than the UK needs the EU.


I believe the need is equal. But many other EU members are already asking the UK to invoke Article 50 immediately. That means they don't want the UK gov. to start asking for special deals.

#3: One word: BMW.


I believe the supply chain will be seriously affected unless the UK joins the EEA.

#4: More opportunities will be created in the UK, however, as a result of the break.

While writing this piece and after I have been talking to friends and family living in the UK (my wife is English and her brother is a former banking exec). They are really concerned about the City losing power and influence, plus the higher costs of losing the EU internal market.

#5: This I actually do agree is a real, potentially substantiated concern, depending upon how the potential BoJo administration wants to handle things. (Despite EU privacy sensitivity, David Cameron was not exactly a champion for civil liberties either.)

I just believe that the EU directive is the best tool to keep GCHQ powers accountable to some extend.

#6: I'd like to see stats on this because --respectfully -- I find this prediction verydubious. The UK's GCHQ was revealed to be just as guilty as the NSA in all the surveillance that led to extremely heightened nephophobia and data sensitivity in the EU. If the UK loses the opportunity to host datacenters, it will be because of a continuing trend since Edward Snowden's leaks -- not because of the Brexit.


That is true, but many companies are still installing large datacenters in the UK because of the location. I spoke briefly with an exec from EMC (who asked me not to publish her name) and she is really concern about the impact of Brexit on their UK business.

#7: Maybe, but for the most part very doubtful -- and where will they move to, besides? Major EU countries like France aren't exactly noted for being tax havens. Plus, with all the uncertainty surrounding the EU's stability now that one of the few countries that was actually one of its primary financial supporters has left, I sure as shootin' wouldn't want to relocate my HQ to the EU right now. Besides, London has long been a financial and industry center in its own right long before the EEC-cum-EU.

Microsoft has their European HQs in Paris. It is true that London has been a main financial center before the EU, but they have been serious attempts to challenge that recently. Now Paris, Frankfurt and Amsterdam are jumping at the opportunity.


Earlier in the week Stuart Gulliver, HSBC chief executive, told Sky News: "We have 5,000 people in global banking and markets [HSBC's investment bank] in London and I could imagine that around 20% of those would move to Paris."

#8: Again, the UK was a substantial contributor to those EU funds. Sure, some opportunity will be lost to London -- and a lot won't.


Have you heard about the "British Rebate"?

 
Pablo Valerio
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Pablo Valerio,
User Rank: Ninja
6/27/2016 | 2:54:24 AM
Re: Tech and The Implications of Brexit
@vnewman2

Thank you, I agree with you and I believe Brexit is a very bad thing for both sides, the UK and the EU.

But one immediate consequence is that the UK has lost its strong bargaining position in Europe. Seeing the reaction of several EU politicians, tired after the intensive negotiations that happened a few months ago, asking the UK to leave as soon as possible, I believe that a good deal for Britain will depend on the good will of the continent.

I believe the Norway option could be the nest solution, keeping the UK in the EEA. That will keep Britain in the common market, and its citizens, including my wife and the rest of her family, will continue to enjoy the some of the benefits of free movement. But, with the Norway route, the UK will have no place in the EU institutions, including the Parliament, the Commission, and the Council, but it will have to implement the EU Directives.

The next few weeks will be critical. Lets hope for the best.
vnewman2
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vnewman2,
User Rank: Ninja
6/27/2016 | 12:50:11 AM
Re: Tech and The Implications of Brexit
Great points Pablo. That said, nothing is going to happen immediately. There is a very specific legal process for Brexit and the timeline is hardly swift. As the first step, the UK has to give notice to leave under Article 50 of the Lisbon Treaty. Based on the Prime Ministerís announcement Friday morning and questions surrounding who might lead the negotiations on the terms of the UKís exit from the EU, that notice may not be given for many weeks, if not months. That notice is also just the commencement of the process. Once notice has been given, there is then a two year period in which to negotiate the terms of an exit Treaty. As the proponents of the Leave campaign, and indeed the terms of the Leave vote, did not cover any of the terms of the exit Treaty, the reality of Brexit is far from clear. However, if the proposed terms of the exit Treaty are that the UK does not have access to the EU single market, we are far from convinced that Parliament will ratify the exit Treaty. The consequences of failing to ratify the exit Treaty are also entirely uncertain as it has never happened before! Clients may well be wondering if they need to make any immediate changes to their business plans or the way they operate their UK businesses. Until an exit Treaty is signed or the two year period expires (or any extensions mutually agreed between the UK and the EU) the UK is fully bound by its EU Treaty rights and obligations and it cannot simply dis-apply EU law. So status quo on that front. Indeed, despite the hysterical reaction of some politicians, nothing is going to change around here for a long time. The UK is still going to be legally obliged to implement new EU Directives as long as it is a member of the EU. After the exit date, and depending upon the terms of the exit deal negotiated, the UK still may have to implement EU Directives into UK law.
Pablo Valerio
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Pablo Valerio,
User Rank: Ninja
6/26/2016 | 3:46:03 PM
Re: Tech and The Implications of Brexit
 "wonder if the British really looked at all the implications of leaving the EU ?

@Technocrati,

Most people that voted for Brexit did it because of fear and frustration. The UK, as many other countries, have suffer from expending cuts during the financial crisis. But advocates of Brexit used inmigration and payments to the EU to convince mostly retirees and blue collar workers that the EU was the problem.

There was a lot of misleading information ( I call it propaganda) going on. Now, in hindsight many people are regreting their vote, which they casted as a protest vote, never thinking that it was actually going to happen
Technocrati
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Technocrati,
User Rank: Ninja
6/26/2016 | 3:34:00 PM
US Companies Ask Is The UK No Longer Prime Real Estate ?
It will be very interesting to see how US companies handle this new reality of British independence.  Once the dust has settled.  

Do US companies keep their HQ's in the UK or not ?  

I would think so.
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