Uncertainty ahead for government IT following Brexit

Uncertainty, funding issues and potential changes to procurement lie ahead as the UK prepares to negotiate its Brexit deal, but suppliers remain cautiously optimistic

The decision of the British people to leave the European Union (EU) is likely to affect the government and public sector IT industry.

While the full impact of Brexit won’t become clear until the UK formally begins negotiations to leave the EU, the results of the referendum will bring about challenges for procurement, funding and skills. However, IT suppliers remain cautiously optimistic.

For local government in particular, where EU laws and regulation currently affects a range of council services, from employment and health and safety to waste and environmental standards, Brexit poses a big challenge.

Commenting on the decision to leave the EU, a Local Government Association (LGA) spokesperson said that councils “need a seat around the table when decisions are taken over how to replace EU laws as part of the UK’s exit negotiations”.

“There cannot be an assumption that power over these services is simply transferred from Brussels to Westminster. If services are delivered locally, then the power over how to run them should rest locally too,” the spokesperson said.

“Decades of centralised control over funding and services has distanced our residents from the decisions that affect their everyday lives. With greater control in our areas we can improve services and save money.”

Communities in England have already been allocated £5.3bn of EU regeneration funding, lasting until 2020.

However, that funding is now under threat with Britain no longer being part of the EU, and with local councils already suffering from budget cuts and restraints, money could become a serious issue and without funding, digital projects could be put on hold.

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“It is important for the government to guarantee it will protect this vital funding to avoid essential growth-boosting projects stalling and local economies across England being stifled,” the LGA spokesperson said.

Neil Everatt, CEO of Software Europe, said: “It’s easy to look at the falling value in currency and stock market uncertainty and make assumptions of impending cuts.”

“Will this mean that local councils and healthcare organisations look at current budgets and start spending more aggressively ahead of any presumed future changes? I certainly think it’s a possibility that spending could go up, while budgets allow,” he said.

Brexit uncertainty 

As BCS chair Paul Fletcher pointed out in a previous Computer Weekly article, we are now beginning a process of “huge national significance, against a backdrop of uncertainty”.

Tina Hallett, government and public sector lead partner at PricewaterhouseCoopers (PwC), said despite facing uncertainty, now is the time for both industry and public sector leaders to work together “to deliver an exit deal that protects jobs and productivity and growth, but also provides stability and cohesion right across the UK”.

Exactly what Brexit means for EU workers and the already existing skills shortage, both inside and outside government, won’t be clear until we know the outcome of the UK’s negotiations with Brussels.

While economists are suggesting that the best approach would be a deal similar to Norway’s, with membership of the EEA giving Britain access to the digital single market, it is by no means a certain outcome.  

“Exiting the EU will affect the public sector in many ways, but it will be particularly felt by staff as migration rules come into play,” said Hallett.

“However, there will also be fiscal consequences – the return of EU contributions will open up new choices on where the money is spent, spelling the end of some funding streams and new opportunities in other areas, and this may provide a potential opportunity for the government.”

GDS further delayed

The government’s digital strategy, which has already been delayed until after the referendum, is also likely to be delayed further. Ahead of the referendum, the strategy had already been drafted, and aimed to give a “good overview of what the government is doing in terms of digital”.

However, the looming Brexit is likely to require significant changes to the strategy. Although chancellor George Osborne said that an emergency Brexit budget won’t happen, at least not for the time being, the volatility in the financial markets could affect spend across all government sectors, including digital.

Although government departments have specific plans in place for the remainder of this parliament, most – if any – won’t have any concrete plans on how to deal with Brexit and policies may need to be rewritten.

In addition, big IT projects, such as the rural payments IT system, used by farmers to apply for their EU subsidies, may be completely redundant.

Business as usual

Government IT suppliers are cautious in their predictions of the impact Brexit will have. While Microsoft and Fujitsu declined to comment, a spokesperson from EMC said while “it isn’t the outcome we’d hoped for”, it’s time to return to business as usual.

Kelvin Prescott, director at Innopsis, the trade body for the Public Services Network (PSN) networking and services suppliers, said it’s too early to say “whether parting will be sweet or sorrowful”, but added that it presents a big change to how the UK governs itself.

One area in particular that could be affected is public sector procurement, as the Official Journal of the European Union (OJEU) tenders could become obsolete.

“Under the EU, public sector buyers have had to comply with a number of regulations when awarding contracts,” said Prescott.

“These include publishing in the European Journal for contracts more than €135,000, setting fair evaluation criteria, following procurement procedures described in the regulations and not discriminating against companies from other EU states in awarding contracts.”

“So does a Brexit vote mean we will strip away red tape associated with these regulations? In practice, the vast majority represent common sense.

“While the UK might decide not to continue to publish in the European Journal, we will likely continue to invite European companies to bid for work where they have something valuable to offer. With this in mind, we believe the number of real changes would be minimal.”

Neil Everatt said his “gut feeling” is that there won’t be any immediate effect on the way public sector organisations do business with their suppliers, or have an impact on procurement.  

“Suppliers at all levels will likely need to review their current contracts around data governance and data protection, which are ingrained in EU law,” said Everatt.

“This will be a longer-term process, which will be dictated by the agreements made between the UK government and the EU, but it’s certainly possible that data protection regulations will be up for review.”

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