Article 50 triggers uncertainty for the tech industry

As prime minister Theresa May formally notifies the EU of Britains intention to withdraw its
membership, the tech industry prepares to move into uncharted territory

Two years of uncertainty begins on 29 March, as prime minister Theresa May triggers Article 50 and
launches the formal process to exit the European Union (EU). For the UKs tech industry this means
its time to officially begin to prepare for Brexit.

Earlier this year, industry body TechUK outlined its views on what should be the key Brexit
negotiation priorities, highlighting access to the EU market, skills and cross-border data transfer.
Having that access could be key in ensuring the UK continues to be a digital leader.

TechUK CEO Julian David said the triggering of Article 50 is the start of a historic process that will
shape the future of the UK and Europe for generations to come.

The EU and the UK government now have a responsibility to work together to secure a deal that
supports the jobs and livelihoods of citizens across the UK and the EU, he said.

The UK is already facing a skills shortage. In fact, the digital skills gap costs the UK economy 63bn a
year, according to a report by the House of Commons Science and Technology Committee, published
in 2016.

James Parsons, CEO and founder of digital solutions company Arrows Group, said that while many of
the implications of Brexit are still unclear. From a digital skills perspective, were already seeing
how Brexit is making top digital talent reluctant to come to the UK and flock elsewhere instead, said
the report.

According to the companys own community data, there is already a 10% reduction of skilled
workers from within the EU relocating to the UK. At the same time, UK talent is moving elsewhere.

If this trend continues, it could lead to a brain drain of top UK talent, as generally they will want to
work where the exciting projects are, he said. Were already seeing an increase in best-in-class
developers taking roles in Switzerland which continues to be a fast-growing hub for tech
innovation.

Of course, this isnt welcome news to UK companies at a time where the UK digital skills gap is
already large, and where a significant amount of tech talent comes from abroad. As the Government
takes these next steps, its critical that it puts the right laws and incentives in place to keep top tech
talent firmly on UK shores to enable innovation.

Read more about Brexit

Since the Brexit vote, IT contractors have seen higher pay rates and longer contracts, which
indicates businesses caution over permanent recruitment.

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 Microsoft has raised the price of its Surface PCs by as much as 15% in the UK because of the
falling value of the pound since the country voted to leave the EU.

Within government, the skills gap is also evident. An NAO report, published last week, showed that
the government needs an extra 2,000 digital staff within five years, costing up to 244m annually if
its to keep up with digital projects.

Its not all doom and gloom. Tech City UKs annual report, published earlier this month, heralds the
UKs digital sector. The report found that the collective annual turnover of what digital tech
industries was 170bn in 2015, and 6.8bn was invested by private equity (PE) firms and venture
capitalists (VCs) in UK technology companies in 2016 twice as much as France, with 2.4bn.

The governments own plans, as set out in several strategies in recent months, are also preparing for
a post-Brexit Britain. Mays industrial strategy aims to create a prosperous post-Brexit Britain
through developing Stem skills, investments in science and innovation, and infrastructure upgrades.

Access to the market

One thing that could alleviate the industrys fear and uncertainty would be confirmation that UK
businesses would still have access to the EU single market. In its Brexit priorities, TechUK highlighted
that it wants the government to ensure maximum access to the single market for digital products
and services, and to make sure leaving the customs union doesnt leave UK trade bound up in red
tape.

However, May has already said it is impossible to leave the EU and remain part of the single
market.

TechUK CEO Julian David said the tech industry wants a trade agreement that ensure the industry
continues to grow, including continued market access, frictionless movement of talent and a robust
legal process for cross border data flows.

Both sides must remember that a good deal for tech is a good deal for everyone. A new relationship
must be forged that not only works for todays economy, but for tomorrows digitally-enabled
world, he said.

We urge all parties to enter into the negotiations committed to achieving an outcome that supports
the strong mutual interests of both the UK and the EU. These negotiations will be complex and
arduous, but must be conducted in a spirit of partnership and mutual respect if they are to achieve
the outcome that works for tech, the public and the future.

Smaller companies deterred by tariff

Research from the Federation of Small Businesses (FSB) found that one in four smaller companies
would be genuinely deterred from trading with the EU should any tariff no matter how low be
introduced, and one in three businesses would stop trading with the EU should a tariff rate

Ross Mason, founder of MuleSoft, said Brexit has thrown UK involvement in the EU digital single
market into chaos.

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With Article 50 being triggered, it is clearer than ever to me that being outside of a digital single
market would damage economic growth in the UK, he said.

A post-Brexit UK needs to be able to flourish in the global digital economy. Yet if Europe simplifies
the rules of digital business and the UK is left out, businesses across the country will be at a
disadvantage: not just those in the UK digital sector, but also all those companies that do business
online.

Whether you are selling goods online or providing a service made up of technology components
that reside in different countries, the cost overhead will only increase if the UK sits outside of an EU
digital single market.