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Since the 2016 referendum, Brexit has dominated everything without its likely final shape ever really becoming clear.
Now, under the new leadership of Boris Johnson, there is a little more certainty. His intention to ensure that Britain does actually leave the European Union (EU) by 31 October is crystal clear. Unfortunately, his willingness to take Britain out of the EU without a deal seems clear too.
I believe this could have serious consequences for the UK tech sector and skills base.
The past few years have been challenging for many businesses. However, this hasn’t been primarily caused by Brexit, but by the wider disruptive forces that are reshaping the business landscape – the digital economy, the demand for transformation, changing business models and shifts in consumer behaviour.
Brexit has added an extra layer of difficulty for businesses to deal with. Because the final outcome of Brexit has not been certain, businesses have had to operate in a policy vacuum: unsure what skills they will be able to access; unsure about what future demand might look like; unsure about the costs and administrative overheads of doing business in the future.
The UK remains a leading centre of technology investment and activity. A record £3.9bn in venture capital was invested in UK tech companies in the first half of this year, with some major investments into UK startups. However, there are signs that other countries in Europe are beginning to close the gap, while foreign investment in UK tech fell by 29% in 2018.
A good barometer of the health of any sector is the recruitment market. Demand for tech talent in London in particular is softer than it should be. Businesses are taking a short-term approach and are reining back on investment in skills.
At the same time, Brexit has knocked candidates’ confidence and appetite to move jobs. Tech specialists in Europe are thinking again about coming to the UK. In the internal UK market, individuals are more reluctant than usual to move because of the uncertainty hanging over future prospects and the “last in, first out” convention. Why take the risk? The premium to move employers at this time has therefore increased substantially.
This is making life harder for tech businesses and for corporates looking to boost their tech teams. They are having to pay more to attract the right talent, while at the same time more contractors have taken permanent roles, making it harder for businesses to fill short-term gaps with freelance resource.
This will only get worse if no-deal Brexit is implemented. Already, talk of no-deal and the general language of “no compromise” has had an immediate effect on staff morale, creating alienation, polarisation and division. For multinational groups which have businesses in the UK and abroad, it creates a huge challenge in maintaining a sense of corporate unity, particularly for those with subsidiaries and clients in mainland Europe.
The no-deal mantra is in danger of ruining the UK’s brand with key trading partners. There have even been threats to renege on the UK’s commitment to pay the £39bn divorce bill. From a commercial perspective, this creates a hostile trading backdrop in transactions across the continent.
I personally didn’t vote for Brexit – but I believe a soft form of Brexit achieved a majority backing of the UK, and there is likely a consensus that the politicians have to get on and implement that. What business needs is a managed transition – an orderly exit that restores certainty over the future state. A no-deal Brexit will be the worst of all worlds.
In the meantime, I hope that companies sustain and indeed accelerate their investment in tech. Otherwise, Britain could move backwards relative to its competitors and the damage of this period in UK history could become longer lasting than any of us would wish to see.
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