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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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?
Hiring could become more expensive as the free movement of skilled workers in the EU is curtailed. It is conceivable that, within a couple of years, EU nationals will need visas to work and reside in the UK -- and vice versa. The situation will affect the ability of tech companies to hire the engineers, data scientists, and IT workers they need. Meanwhile, many people in the UK and the rest of Europe could start moving to establish their residence in Britain and another EU country to keep their right of residence after Brexit takes effect.
The UK soon will have no voice in the European Council. Article 50 of the Lisbon Treaty (which serves as the EU Constitution) makes clear when a member state invokes the desire to leave the union, it can no longer participate in the discussions of the Council, which is led by President Donald Tusk (pictured above). This will effectively limit the ability of the UK to influence new European laws, policy, and trade.
For example, Europe could decide to have stricter rules for nonmember states to provide IT services or collect data in the block, and the UK will be left out of the negotiation. While some proponents of Brexit believe the regulatory costs of doing business in the UK could fall, this is far from certain. At the same time, there is little doubt that British firms' access to EU markets would suffer. The UK cannot assume that it will be able to dictate terms, because it runs a trade deficit with the EU.
Personal travel will not be seriously affected, but trade will become complicated. Giving up EU membership means losing access to the customs-free common market. This in turn opens up the possibility of trade tariffs on certain goods, as well as more expensive procedures to ship products to and from the UK. Companies such as Amazon will have to rethink their European logistics to accommodate the new reality.
UK tech firms will no longer be able to bid on European public works projects. For instance, a UK tech company will no longer be able to bid on building the next data center for the European Central Bank data center, or participate in a European-funded project for next-generation mobile technology.
Online privacy for UK citizens will be reduced. The UK doesn't have strong privacy laws, and most online businesses have complained in the past that the European Privacy Directive affects their ability to conduct business. But those same rules also protect UK citizens against the indiscriminate collection and processing of their data.
It is highly likely that the UK will have to negotiate a framework agreement with the EU for the transfer of data of European citizens to the UK, one similar to the "Privacy Shield" currently in place with the US.
Brexit will seriously influence the deployment of new data centers in Europe by foreign companies. Some firms, such as Google, IBM, and Facebook, have already installed their main data centers in other European countries. The likelihood that those corporations will establish new facilities in the UK will be reduced sharply.
The UK has been a preferred location for many large tech companies to establish European operations. Firms such as Apple, Cisco, VMware, IBM, and Google all have their European headquarters in the London area. It is highly likely that some of them will keep a strong presence in the UK but move their European HQs elsewhere.
London is considered the financial capital of Europe, and probably the most attractive city for startups. Unlike many of their fellow UK citizens, the people of London voted overwhelmingly to remain in the EU. Now it is likely that the EU will move all the foreign exchange trading to continental Europe, probably to Frankfurt, the seat of the European Central bank.
Startups seeking access to European funds or participation in European projects, such as the Horizon 2020 program, will likely establish their operations in other European cities, such as Berlin, Paris, or Barcelona.
London is considered the financial capital of Europe, and probably the most attractive city for startups. Unlike many of their fellow UK citizens, the people of London voted overwhelmingly to remain in the EU. Now it is likely that the EU will move all the foreign exchange trading to continental Europe, probably to Frankfurt, the seat of the European Central bank.
Startups seeking access to European funds or participation in European projects, such as the Horizon 2020 program, will likely establish their operations in other European cities, such as Berlin, Paris, or Barcelona.
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