Brexit and the UK technology sector - read our analysis of the implications
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On the morning of 24 June 2016, the UK awoke to the realisation that it would be leaving the European Union.
Many people, both within and outside of the technology sector, now fear for their jobs and their future, and experts have claimed the decision to leave will result in budget cuts and difficulty attracting IT talent to the UK.
IT projects could stall
As firms begin to assess what the UK’s exit from the EU means for them, there will be a period where all department heads, including CIOs, will be forced to take a second look at projects they have under way.
According to Andrew Horne, practice leader at business management consultant firm CEB, firms are likely to cut spending and freeze projects until the landscape becomes more certain.
“Faced with market uncertainty and the possibility of a downturn, combined with lack of clarity on the eventual shape and impact of Brexit, companies may decide to take a defensive stance by cutting spending, or a wait-and-see attitude by delaying or scaling back projects,” he said. “In particular, it may take longer for 2017 plans and budgets to settle down.”
A reduction in IT budgets is something tech departments are used to. One of the long-term effects of an EU departure, however, is the need to re-evaluate where firms will find skilled IT workers, and whether they can keep those they already have.
IT skills in turmoil
“Depending on how the negotiations between the UK and EU pan out, many other IT decisions could also be affected,” said Horne. “For example, questions relating to IT skills needs, recruitment plans and IT organisational design.”
Workers from EU countries, who would previously have been allowed free movement to work in the UK, might be limited once the UK officially leaves the EU. It will depend on the terms negotiated with the EU, and the firms in question, as to whether or not EU workers will be able to take up or continue in positions in the UK.
Guy Lougher, partner and head of the Brexit advisory team at Pinsent Masons, said there would be changes in the free movement of workers from EU countries into the UK. “What that means is going to vary. In the construction sector, which relies on a lot of skilled EU labour, it could have quite a significant impact. It will be the same for high-tech sectors such as research, which rely on a lot of very skilled EU labour.”
The UK is currently suffering from a digital skills crisis, with firms unable to find the skilled workers they need and the number of people unable to use technology costing the economy £63bn a year.
The EU believes its skills gap is closing, and has forecast that the number of unfilled digital jobs in the EU will drop to 756,000 by 2020 – some 64,000 fewer than previously expected.
But with the UK set to part with the EU, it may no longer have access to as many skilled workers to fill empty tech positions. Industry experts fear that not only might the “leave” vote dissuade talent from coming to the UK in future years, but it could also force existing UK talent abroad.
Migration of talent
Frost & Sullivan’s Ajay Sule, practice director EIA, and Adrian Drodz, research director of digital transformation, agree that the UK skills shortage could widen without talent from the EU, and the vote to leave might push EU workers back overseas.
Ajay Sule and Adrian Drodz, Frost & Sullivan
“By putting a brake on immigration, companies may struggle to find the people they need to drive their businesses forward,” they said. “In addition, EU citizens working in the high-tech sector may feel their careers are best served elsewhere. There’s a real possibility that many will seek opportunities elsewhere in Europe.”
Analyst firm Forrester’s report on Brexit stated this would affect the IT industry and areas outside of the tech sector where digital skills are essential, such as customer-facing roles.
“Uncertainty over the UK’s future immigration laws (ie, who will have the right to stay) will both drive footloose talent to look for jobs abroad and dissuade others from coming, and firms will struggle with new and likely more difficult work visa regimes,” the report stated.
Future digital workforce
London, especially, is an area of entrepreneurship in the technology space. Russ Shaw, founder of Tech London Advocates, said the London tech sector would continue to thrive despite the unexpected result.
“Entrepreneurs are problem-solvers before all else, and I expect the sector will rebound to deal with this new challenge and fight hard to remain the capital of European tech,” he said. “Our first challenge is to reassure EU nationals working in tech that they are welcome and valued, while strongly making the case for a visa system that attracts and rewards international talent.”
The potential impact to the UK tech sector in light of the leave vote is great, but experts emphasised the need for a focus on improving the future pipeline to ensure the UK builds a home-grown future technology workforce.
David Evans, director of policy and community at the BCS, urged the IT industry to focus on creating a digital technology environment that would continue to attract talent from outside the UK.
Tudor Aw, KPMG UK
“It is absolutely essential that we support and grow our academic base in computing, foster industrial collaboration and send a message out to the international academic computing community that we want to increase collaboration,” said Evans.
“We must apply a sophisticated view of digital talent to our negotiations with the EU, recognising that IT is a global sector and profession, and that we need to grow and attract the best talent into the UK digital domain.”
The UK tech sector is urging the government to negotiate appropriate rules around visas to ensure those from the EU are still free to take up technology roles in the UK, and experts are advising businesses to make sure its current workers feel welcome.
There has also been mention of ensuring the tech talent pipeline is strong in the UK to ensure there will be enough skilled workers in the future.
But Tudor Aw, head of technology sector at KPMG UK, claimed everything that makes the UK tech sector great, including creativity and great universities that feed into the tech talent pipeline, would remain in place post-Brexit.
“Technology is a sector that will only increase in importance and works without borders,” said Aw. “I therefore continue to view the UK tech sector as one that will not only withstand the immediate challenges of the referendum result, but one that will continue to grow and thrive.”