What will Brexit mean for the tech sector?

Silicon Roundabout, seen as a symbol of the UK tech secto
East London's Silicon Roundabout, seen as a symbol of the UK tech sector Credit: Bloomberg

The technology sector, with its international focus, was a vocal advocate for Britain staying in the European Union. But, in defiance of the widespread concerns, the industry has been thriving in the wake of the decision to leave with investment and expansion thriving.

Whether the picture will change when the Government triggers Article 50 isn't clear, but the signs indicate the sector is well equipped to weather the storm. Here’s a breakdown of what you need to know about how Brexit will affect the technology sector.

Investment

A major part of the tech industry's lifeblood is investment dollars, which are vital if startups are to grow and thrive. After the referendum, some experts worried that investors would shift their attention out of the UK, leaving our companies lacking. So far the prospects on this front aren't as dire as the forecasts suggested.

Tech deals hit a record high in 2016, with investment rounds and takeovers rising by 40pc, according to GP Bullhound. Separate research from London and Partners shows more than £6.7 billion was invested in UK tech companies last year, with the country leading Europe in merger and acquisition activity.

The data showed a drop-off after the vote
The data showed a drop-off after the vote Credit: GP Bullhound

However, investment did slow after the referendum in June, falling 28 per cent on the previous year. Some investors have said this is not entirely linked to Brexit - the second half of last year saw a general slowdown in tech funding.

Solid ideas tend to be the main driver of investment, though, meaning Brexit could leave investment unscathed. 

Talent shortage

The tech industry relies on foreign talent from both the EU and the rest of the world. In the run-up to the referendum tech companies worried that Brexit would lead to a shortage of talent, with visas either being revoked or becoming difficult to attain. One in six new hires between 2009 and 2015 in the tech sector were EU citizens, according to techUK.

However, the early indications are the Government is willing to welcome skilled tech workers from abroad. The Home Office increased the number of tech visas granted in 2016 by 20 per cent to 250, somewhat allaying fears and indicating that the Government will not inhibit the influx of talent.

There has also been a leap in applications for the visas since the referendum.

The next Silicon Valley

Europe’s tech capitals are fighting to be the Silicon Valley of Europe, with Berlin, London, Paris and Lisbon among others vying to be the go-to location for tech on the continent. There were some initial concerns that Brexit would pass the baton away from London, with a wave of start-ups opting to relocate in the wake of the vote.

Since then, Silicon Valley giants have moved to cement Britain as a clear front runner. Google, Facebook, Microsoft, Amazon and Apple all announced major investments in the UK, with the promise to bring thousands more jobs to the country.

Added to this, large tech companies such as Google, Apple and Facebook have had run-ins with the European Commission in recent years while the UK has generally been more supportive, which could further boost Britain. Concerns that start-ups based in Britain would choose to leave the country have proved unfounded.

European competition commissioner Margrethe Vestager
European competition commissioner Margrethe Vestager has been strict on tech companies Credit: AFP

Regulatory barriers

Depending on how the negotiations go, regulatory hurdles could hamper the work of tech companies. The EU has been working on an initiative called the Digital Single Market, which will allow the free movement of people and capital in the tech sphere. Losing access to this could inhibit the ability of UK tech companies to work seamlessly across Europe.  

The Government will also need to ensure the UK’s data protection regulations match the EU’s once Britain exits if the free flow of information is to continue. The UK plans to adopt the Commission’s upcoming General Data Protection Regulation, but the British regulator has warned that this doesn’t guarantee an adequate match.

To ensure data can flow between the UK and Europe after the vote, the European Court of Justice will have to agree that the UK's laws protect European citizens' personal data. Experts have suggested the Investigatory Powers Bill could threaten that.

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