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Brexit with no deal unthinkable for UK tech, Lords committee told

The damage that leaving the EU without a deal will reap on the UK tech sector is unthinkable, a House of Lords committee has been told

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The idea of leaving the European Union (EU) without a deal is so bad, it is unthinkable, according to IT industry experts giving evidence to a House of Lords committee.

Three senior figures from the UK tech sector met the Lords EU committee to discuss how the country’s IT sector views the current plans for exiting the EU.

For some, the idea of leaving the EU without a good trade deal is beyond comprehension. “For me, it is quite hard to think through a no-deal scenario because it would be so disruptive,” Antony Walker, deputy CEO of industry body TechUK, told the committee.

“I think many take the view that it would be such a negative outcome for the UK economy that it won’t happen. The scale and complexity of no-deal is so great that it is genuinely difficult for companies to think through and mitigate.”

A status quo transitional agreement lasting at least two years is the minimum requirement that the UK tech sector needs to remain competitive, said Walker. “Everybody in the sector wants clarity by March,” he added.

“We are very clear that we want a status quo transitional agreement. If we are going to make a success of Brexit, we are going to have to prepare and plan, so we need that time. Two years is the absolute minimum time required.”

There are areas where there will be challenges, even with a good deal – current uncertainty, a future shortage of talent and a shortage of investment funds are top of the list.

Simon Hansford, CEO at UK cloud hosting supplier UKCloud, said the industry needs to know quickly what the final relationship with the EU will look like or decisions cannot be made about the future. “It is the uncertainty that will kill us,” he said. “We have multiple multimillion-pound investment decisions that need to be made, but it depends on capital, certainty and access to people.”

Read more about how Brexit is impacting the UK IT industry

  • London mayor Sadiq Khan opens London Tech Week and says Brexit will not hold back the city's growing tech sector.
  • IT industry body TechUK outlines what it believes are the Brexit negotiation priorities for the UK IT sector.
  • With the UK’s formal Brexit notification due on 29 March, heralding two years of uncertainty, the tech sector’s lobbying for consideration in negotiations with the EU is likely to intensify.
  • The tech industry group TechUK has set out a five-point plan, urging government to work with the IT sector in a post-Brexit UK.

Hansford said small and mid-sized IT businesses are most affected by uncertainty about the future UK-EU relationship. “There are very few SMEs that have the will and resource to invest in the unknown,” he added.

Russ Shaw, founder of Tech London Advocates and Global Tech Advocates, told the committee that startups are not in a position to prepare for the unknown because they are so busy trying to get their businesses up and running. “Contingency planning for Brexit is not high on their agenda,” he said.

One of the many uncertainties is the future access to talent as the UK potentially closes its doors to free movement of EU citizens. TechUK’s Walker said about 8% of talent working in the UK tech sector comes from the EU – highly skilled and talented people, with most earning between £45,000 and £80,000 a year.

The number of EU workers in the UK tech sector would have to increase as the industry grows because the pipeline of UK talent cannot meet the demand, said Walker.

“There is a global race for tech talent and if you want to be a leading global digital economy, you have to be open to the best global talent,” he said. “Sadly, at the moment the message that is going out around the world is not that the UK is open – and we need to fix that.”

Tech London Advocates’ Shaw said regular surveys of the organisation’s community reveal that the shortage of talent is their biggest concern.

He echoed Walker’s fears that the UK no longer appears open to talent. “Some of the talent from around the world that was planning to come here is now thinking twice because what is coming out of the UK, related to Brexit, is uncertainty,” he said.

UKCloud’s Hansford described the difficulties this talent shortage is causing the supplier. “We have about 50 vacancies at the moment in a business with 200 employees,” he said. “This is our single biggest inhibitor to growth and, clearly, if talent disappears or becomes harder to get, it becomes even harder for us.”

EU funding pulled

But talent is not the only resource being diverted from the UK post-Brexit. Funding that was set aside for the EU tech sector has been halted for UK companies.

As Computer Weekly reported in December, UK insurance sector startup Honcho has seen its round of funding from the European Investment Fund pulled. It later raised the funds it needed through a crowdfunding project.

Tech London Advocates’ Shaw said that although nothing had been announced officially, EU Investment Fund financing had appeared to slam to a halt for UK startups.

“The European Investment Fund has effectively stopped investing in the UK,” he said. “There was no public message about this because they won’t disclose it, but it did stop. What can we do now to prepare the British Business Bank to fill that void?”

Beyond funding and recruitment problems, there are other challenges facing startups. Shaw told the Lords committee that companies in the UK fintech (financial technology) sector would be hit hard. For example, UK finance firms will lose their right to trade freely across the EU, known as passporting rights.

The executives appearing before the committee asked for the government to improve communication with the tech industry about Brexit progress. They said there had been a reduction in information since December.

Watch a recording of the Lords committee meeting here. ...................................................................................................................... .....................................................................................................................

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