How Brexit Can Help the UK’s Thriving Technology Sector Sail Further

Summary

• UK tech sector’s investment soared to £10.1 billion in 2019, a £3.1 billion increase as compared to 2018 data
• UK digital tech economy increased 6 times faster than any other industry, with the contribution of £149 billion to Britain’s economy in 2018
• As of January, London had 43 unicorns in comparison with 10 in Berlin, which is its closest central competitor

The business won’t be as usual in the UK from January 2021. Brexit will bring various structural and operational changes to many industries and businesses in the wake of a no-deal Brexit scenario.

Among other sectors, the UK’s tech sector is one of the industries which could see a major impact of Brexit. The impact can be multi-dimensional as the EU has a major role in Britain’s tech market in terms of business activities and consumer demand. Factors like trade terms, regulatory laws, work permit visa restrictions and others would play a significant role in impacting the tech sector.

UK’s tech sector

Britain has one of the world’s biggest technological ecosystems, with sizable startups established around a robust entrepreneurial culture. British technology promotes most other sectors in the country such as healthcare, creatives, financial services, agriculture, digital, entertainment, transport, communications and cybersecurity.

London is the epicentre of the European tech hub with 43 digital tech unicorns in 2019 and 58 high-value tech scaleups in the pipeline. A 2018 report titled ‘Titans of Tech: European Tech Comes of Age’ by an investment firm GP Bullhound highlighted that approximately 26 of the 69 European unicorns are in Britain, and these 26 unicorns’s aggregate value is around $64 billion.

The UK’s tech sector has seen massive capital inflow with the industry saw an investment worth £28 billion between 2011 and 2016, in comparison with France, which received £11.4 billion, while Germany and the Netherlands saw investments worth £9.3 billion and £8.6 billion, respectively, as suggested by the UK’s department of international trade.

The year 2019 was equally incredible for Britain’s tech sector as the investment in the industry soared to £10.1 billion, a £3.1 billion increase in comparison with 2018, as suggested by TechNation, a national network for ambitious tech entrepreneurs.

The country’s digital tech economy increased 6 times faster than any other industry, with the sector contributing £149 billion to Britain’s economy in 2018, which constitute 7.7 per cent UK gross values added (GVA). Moreover, the financial technology industry remains Britain’s largest tech investment sector, with a 100 per cent rise from 2018. Nearly 44 per cent of Europe’s fintech unicorns and firms having a value between $250 million and $800 million are based in the UK.

Also read: Rise in UK Tech Exports: Will the Rally in Tech Stocks continue?

In fact, in 2019, the overall capital investment in the US and Chinese tech startups plunged sharply, while the investment in the UK increased by 44 per cent. The number of employees working in Britain's tech firms grew by 40 per cent between 2018 and 2020. And now, the UK’s tech sector constitutes 9 per cent of the national workforce with 2.93 million jobs.

Brexit: Boon or Disadvantage?

The Brexit impact has been debated with many experts feeling that the breakup and no trade deal with European Union will leave Britain’s tech industry in distress.

According to a study by TopCV, nearly 16 per cent of Britain’s tech employees are planning to leave the UK and their present employment to enhance their professional career due to Brexit. However, if one looks at the UK’s tech sector more broadly post Brexit, the situation looks different. Surely, the UK is much ahead of other European countries and has a promising future.

As of January, London had 43 unicorns in comparison with 10 in Berlin, which is its closest central competitor. The UK has five of the top 20 European cities for technology, with Manchester has now become the fastest-growing tech centre anywhere in Europe. Apple, Google and Facebook have established their headquarters in London while Netflix had also announced to triple their current office space in London.

Another area where Brexit can turn a gamechanger for the UK’s tech sector is the immigration rules. Once the UK leaves the EU, the European Union locals would need a work visa to get employment in Britain. With this, the UK would open the doors for more migrants and from those non-EU nations, which allows UK tech firms to have the best access to the talent pool across the world.

The number of people applying for the Tech Nation visa, which enables people to work in Britain’s digital technology industry, has reached the highest level since 2014. This can translate a healthy and lucrative growth of the UK’s technology sector with more innovative offerings.

Also, the regulatory policy, tax and economic vision play a pivotal role in the industry’s success story. The Guardian reported that at least 30,000 paid lobbyists exist in the EU and they are influencing nearly 75 per cent of all the EU’s legislation. Most of these lobbyists represent old executives who are inherently unreceptive to innovation and competition.

This indicates that there could be conflict and vested interests among member states, leaving room for UK tech businesses to pitch to the government directly and more coherently. Now, with Brexit, the UK tech sector can directly come under the purview of the British government, which can control all the taxes, laws and other policies. This, in a way, can turn the British tech sector more lucrative and transparent.

Lastly, the global trade norms are changing in the wake of the coronavirus pandemic. The current EU trade policies have emphasized agriculture as a priority, while Britain’s digital tech industry, along with other sectors, is seen playing a second fiddle. Also, Brexit would allow the UK government to streamline the country’s tech sector with a focus on emerging trends such as data flows, artificial intelligence and many more.

Towards the end, one can say London, which has been the preferred destination for entrepreneurs and talent to start businesses or join early-stage startups for the past 20 years, may not see its position getting threatened due to Brexit.

The UK tech sector will continue to grow except for a few disruptions for some time in the face of the Brexit process, but it will continue to thrive with more emerging technologies.