The implications of Brexit on high technology

Last week Thursday, the United Kingdom (UK) voted to leave the European Union (EU) after 43 years of membership. When the issue was tabled and eventually put to vote, many people inside and outside of UK did not take the issue seriously – with the thought and attitude that the UK would not divorce itself […]

Last week Thursday, the United Kingdom (UK) voted to leave the European Union (EU) after 43 years of membership. When the issue was tabled and eventually put to vote, many people inside and outside of UK did not take the issue seriously – with the thought and attitude that the UK would not divorce itself from its fellow Europeans. Obviously, the power of the will to be independent and the desire to determine one’s own destiny have been underestimated. Reasons given for the vote include the vengeance of the disenfranchised, who are basically the less privileged. For one thing, and for whatever it is worth, this seems to be democracy at work.
The decision had immediate effects-mostly negative-on businesses all over the world. Stocks plummeted; major currencies lost their values, especially the pound sterling, which saw its lowest value relative to the dollar since 1985. The British prime minister was the first real casualty, as he resigned his post to “allow others take Britain to the new land.”
The potential effects of UK’s decision to leave EU on the tech companies in UK and the rest of Europe will also probably be negative, at least on the short run. Consider these facts essentially taken from a BBC article written by Chris Baraniuk on 24 June 2016: a) At least 20% of digital businesses say that EU countries besides the UK are an important source of talent, b) Over half of European financial tech “unicorns” – that is, startups with capitalization of up to a billion dollars – are based in the UK, c) There are 21,000 jobs across the EU in mobile gaming – the UK has the largest single share with 5,000 full-time employees, d) Five million euros (£4.1m) in prizes are available for the development of clean technology from the European Commission’s Horizon 2020 program,  e) In total, the British private sector received £1.4 billion in funding from the EU in 2013, and f) Hundreds of start-ups have benefitted from the UK government’s Tech City initiative, for example, and both employees and customers “have been plucked from EU member states.”
The EU is currently in the process of allowing phone users enjoy movement from member state to member state without having to pay roaming fees. Telephone consumers from the new UK will lose out on this! The new EU net neutrality rules also won’t apply in the U.K., which could be unfortunate for consumers there.
Some in UK are more optimistic: “Technology is a sector that will only increase in importance and works without borders,” said Tudor Aw, head of technology at KPMG UK. “I therefore continue to see the UK tech sector as one that will not only withstand the immediate challenges of the referendum result, but one that will continue to grow and thrive.” (KMPG is a global network of professional firms providing Audit, Tax and Advisory services.) The BBC article states that David Cameron’s former adviser Rohan Silva, who is credited with helping to forge Tech City in the first place, was said to have tweeted a “rallying cry:” “I also believe that Britain will always be open, creative and entrepreneurial.” A chief executive and tech company co-founder David Galsworthy is quoted as saying that he had little doubt that London would continue to be “a central hub globally for this sector,” given how “interconnected the world is.”
Yet there are speculations that “some of the more mobile firms in the British tech sector will simply find it easier to migrate to hubs in the EU.” A significant decrease in new incorporations in London in favour of Berlin, as well as an influx of successful London start-ups into Berlin, is anticipated by an industry executive. There is also the possibility of domino effects: “In the event of a Scottish independence referendum that leads to reunification with the EU, it’s possible some start-ups could move north of the border. High tech work visas in and out of Britain may no longer be automatic.
One effect that Brexit will have on American tech firms – Google, Facebook, Microsoft, and so on, is not difficult to predict, if Germany and France remain in the new EU. I have done many articles in this column on the ways in which the EU countries have always come down hard on the world’s leading high tech companies, which are invariably American. The UK had always served to soften the grip of these EU countries. With UK gone out of EU, the regulatory landscape in Europe for American high tech companies could be very rugged in deed. (The ruling of the EU Supreme Court on the Safe Harbor Agreement in October 2015 is quite fresh in our minds.)
The major outcomes of Brexit may take a year or longer to unfold.