Brexit and the UK technology sector - read our analysis of the implications
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Just six weeks ahead of the UK referendum on European Union (EU) membership, a study shows that almost two-thirds of European IT and telecommunications firms are unprepared for a Brexit result.
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Only 35% of the firms polled have developed a clear plan for dealing with the impact of a leave vote, according to the snapshot survey commissioned by international law firm Pinsent Masons.
The poll of senior decision makers in more than150 businesses across the UK, France and Germany found that 57% have held no discussion at board level about the potential impacts of Brexit.
Of the organisations that have undertaken board level discussions, only 11% admit to having discussed or planned for the relocation of operations.
Pinsent Masons said the figures reflect that, while many larger businesses have begun contingency planning for Brexit, a significant proportion have not yet contemplated the impact a vote to leave on 23 June 2016 might have.
Guy Lougher, a partner and head of the Brexit Advisory Team at Pinsent Masons, said if the UK votes in favour of leaving the EU, there will be profound implications for all businesses irrespective of whether they operate or trade in or with the UK.
“A number of economists believe a vote in favour of Brexit would create a profound economic shock. Whether one accepts such predictions or not it is hard to imagine that – at the very least – exchange rates will not be affected,” he said.
The uncertainties in a Brexit scenario are so great that there may be a temptation to do nothing until the referendum result emerges, said Lougher.
“However, our advice to businesses is to start taking steps now. While one cannot protect against all risks, it is possible to identify the risk areas and start thinking about how these could be mitigated,” he said.
Minimise Brexit disruption
According to Pinsent Masons, there are a number of measures businesses can institute now to minimise the disruption of Brexit on business, from assessing the number of workers likely to be affected by freedom of movement rules to reviewing how and where customer data is held.
“There are some simple things that businesses can do. Foremost among those should be identifying any business-critical contracts and considering if they are future-proof. Any agreements which specifically reference the EU as the territory governed by the contract may lack clarity,” said Lougher.
“It is likely to be easier to agree amendments to those agreements now, especially where contracts have not yet been signed, rather than after a vote when the people on the other side of the table will know that the clock is ticking.
“It’s also surprising, given the potential for economic disruption, how few businesses have entered into discussions with investors and funders as to their attitudes to risk in the aftermath of a leave vote. It would seem prudent to have those conversations now amid relatively benign conditions.”
However, Lougher said it is encouraging that some businesses have started to consider what commercial opportunities might arise from a vote to leave.
“While this emerged as being one of the top two steps most likely to have been taken by businesses in France and Germany, this was not the case in the UK,” he said.
Businesses on Brexit
When asked why they wanted to stay in the EU, three-quarters said it made the UK more attractive to international investment, gave companies a better deal on trading relationships in the EU and made the UK more globally competitive.
A majority of tech firms believed a vote to leave would create more risk and uncertainty for their business, make the UK less attractive to foreign investment, give the UK less influence on the issues that affect their business and force the UK to trade on less favourable terms internationally.
More than 90% of those in favour of leaving the EU said it would give the UK more flexibility in a global economy, and 64% believed it would make the UK more globally competitive.
Just under 60% argued it would give the UK a better deal in its relationships with the rest of the world. The main disadvantages of staying in the EU, they said, were the UK’s lack of influence and the regulatory burden imposed by the EU.
Read more about Brexit
- Do IT businesses believe it is in their best interests to leave or stay? Billy McInnes explores the possible ramifications of a Brexit.
- IT consultant Peter Chadha gives five reasons why the UK would be better off leaving the European Union.
- If the UK voted to leave the EU, it could face a difficult negotiation to conform to new data protection regulations, say experts.