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UK tech industry holds its breath as Brexit hits crunch time

11
Mar
2019
Imam Hoque
COO/CPO

This is set to be a pivotal week for the UK and its departure from the European Union, not least for the tech industry, which is often hailed as a key part of the country’s post-Brexit strategy. But what will Brexit’s impact on the tech industry be?

For members of the UK tech industry, the uncertainty around Brexit has forced a waiting game, where companies attempt to shield themselves from negative outcomes – without being able to be sure of what those may be.

“Every business is used to a changing landscape and can work with almost anything that happens – provided there is clarity. It’s this uncertainty that’s the hard part,” said Julian Ranger, founder of digi.me.

This uncertainty has already translated into real impacts for businesses, and as things continue to develop, many fear there are more problems ahead.

Brexit uncertainty is as strong as ever

Back when Article 50 was triggered, most people assumed that as the deadline approached there would be a greater level of certainty over the Brexit impact on the tech industry. However, with less than three weeks to go and a slew of key Parliamentary votes likely this week, uncertainty remains as strong as ever.

“We don’t necessarily have any better of an idea about what Brexit will look like now than we did a year ago, but one thing that is certain is that it will bring an increase in operational complexity,” said Eltjo Hofstee, managing director of Leaseweb UK.

“The most dangerous part of the Brexit process is the prolonged uncertainty. Businesses can’t prepare for the unknown and it puts the brakes on many aspects of tech start-up growth,” added Antoine Bascheira, CEO and co-founder of tech startup rating agency Early Metrics.

For many businesses, the management of Brexit thus far has been actively damaging to companies both in the tech industry and beyond.

“The current uncertainty is not helping anybody, whether in the UK or mainland Europe and whatever industry they happen to be in, not just technology,” said Simon Hill, CEO and founder of idea management software provider Wazoku.

“Right from the start the whole process has been poorly handled. The government has taken an admittedly difficult situation and made a mess of it. The lack of collaboration and meaningful openness is alarming and leaves us now in a very difficult situation.”

This is set to be a challenging week for the UK government, but for businesses it is essential that this uncertainty is resolved – in whatever way is possible.

“Whatever happens next, the government needs – as a priority – to provide some clarity to UK businesses to minimise disruption and financial instability,” said Matthew Aldridge, CEO and co-founder of Mango Solutions.

Brexit impact on tech industry: Businesses already feeling the crunch

While many have voiced concerns about how different Brexit scenarios could prove damaging to UK businesses, the Brexit impact on the tech industry has already begun to be felt by some.

For example, Senseye, which produces software for industrial machinery monitoring, has focused its efforts on the international market over the last year due to the state of uncertainty in the UK.

“Although the returns that can be achieved using our technology are proven, adoption in the UK has undoubtedly been affected by Brexit. We are growing despite this, in part by focusing on export markets, both in Europe and further afield,” explained Dr Simon Kampa, CEO of Senseye.

“We’re talking to several major manufacturers here that would like to trial Senseye but are unwilling to commit to new innovation projects without more certainty around their European supply chains and export outlook.

“If they don’t get that certainty, there is a real danger that global manufacturers will opt to invest more in their factories located outside of the UK.”

Oxford-based network specialist reseller LAN3 has experienced a similar problem, with customers unwilling to invest in technology while the post-Brexit outlook remains so unclear.

Hiring concerns remain key

One of the biggest areas of concern over the Brexit impact on the tech industry is in hiring and employee retention. While not all companies report this happening as yet, many are worried about what will occur when the reality of Brexit truly hits – particularly given the number of EU nationals employed within the technology industry.

“50% of my staff here in London, of which there are about 30, are from the EU. I have staff from Hungary and Ireland and Germany and Austria and so on and so forth. So, we have a rather nervous 50% of our workforce because they are somewhat in the dark as to where we all are,” said Mark Bembridge, CEO of Smartology.

“No one has left yet and they are very committed to the company, but it is a constant worry for me running the business.”

Smartology has developed a contingency plan to sponsor workers to stay, but Bembridge also has concerns about future employee acquisition.

“I worry that a lot of the people with the skills we need will stop coming to the UK because people are opposed to the position that the country has taken and they worry about not being part of the EU if they move here to work here,” he explained.

This fear is reflected by many others in the industry, such as Imam Hoque, COO and global head of product at Quantexa, which has already begun to feel the impact of Brexit on its hiring practices.

“The reality is that there is an overall shortage in skills within the high-spec technology and data science sectors around the world,” he said.

“As one of the fastest-growing software startups in the UK, having recruited over a hundred technical staff in two years, Quantexa has seen a Brexit related impact on its recruitment. With less individuals coming to the UK due to worries over Brexit, we are now fishing from a much smaller pond.”

For many, this issue is placing an onus on the industry to dramatically step up training and workforce investment to avoid long-term problems associated with the Brexit impact on the tech industry.

“It is up to British businesses, tech and otherwise to invest in grassroots talent and keep up with the rate of international innovation,” said Andy Lord, CEO of Code Nation.

“The UK has a vital untapped resource at our disposal – people. People are the key to giving our tech companies the best change for not only survival but to transform the UK into world leaders in the tech field.”

Brexit impact on tech industry: Success post-Brexit?

Despite the concerns surrounding the Brexit impact on the tech industry, there remains a sense that whatever happens – be it a robust deal or a sudden no-deal – the industry can cope with what is to come.

“Despite economic fears brought on by Brexit, I believe that London and the UK remains a territory full of great opportunities,” said Max Parmentier, founder and CEO of agetech company Birdie.

“Although we explored a few markets, London was identified as the best place in which Birdie would be incorporated; the support and peer networks, talent pool and ease with which you can launch a company makes it a very favourable environment.”

“In the medium to long-term I am hopeful that Brexit won’t be a massive issue, once the uncertainty has been resolved,” added Hill.

“Irrespective of any stance on Brexit itself, I don’t believe tech was ever significantly helped or hindered by the UK being part of the EU, and in consequence leaving will neither hinder nor promote it either,” said Ranger.

“However, in light of GDPR and ePrivacy we must ensure UK has data adequacy to allow data transfer to and from the EU, and we must have a sensible immigration policy that allows us to attract tech talent from anywhere in the world.”

However, for businesses to thrive, they will need to develop a plan – and quickly.

“The most important thing that technology companies will have to deal with in the next 12 months is going to be the banal practicalities of running a business,” said Etienne Greeff, CTO and co-founder of SecureData.

“Logistics, supply chains, and ensuring that employees can work effectively will be the most disrupted areas of business post-Brexit.

“Brexit perhaps has opportunity, but technology companies, must realise that implementing contingency plans that focus on logistics and the practicalities of business need to be set in motion sooner rather than later to be able to come out on top in the next 12 months.”

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