Brexit impact is just getting started in the channel

Although the new year represents a new start in many ways, last year's big talking point - Brexit - will continue to dominate in the coming months and years. Hannah Breeze reports

The UK's decision to leave the EU was certainly a surprise to many. But despite this - and the fact that several of the world's biggest technology companies, such as Microsoft, Cisco and HPE, had strongly come out beforehand in favour of a vote to remain - in the weeks and months afterwards, the channel downplayed the vote's impact.

Many channel faces said that there was an initial blip in sales as the news sank in with surprised customers, but soon after it was business as usual. In vendors' quarterly results since the vote, more often than not, if Brexit was mentioned, it was done so in passing, lumped in with the general category of "macroeconomic factors" which affected businesses.

And outside the channel, it seems the vote did not have the disastrous economic impact many Remainers thought it would. Although the value of the pound has come nowhere near to recovering to its pre-vote levels, many other sets of data have been more positive.

In an Autumn Statement policy paper, the government said the UK economy is forecast to be the fastest-growing country in the G7 in 2016, adding that economic activity grew 2.3 per cent in the year to Q3 2016. The employment rate is at a record high of 74.5 per cent, it added.

However, although it seems that the Brexit vote had a lighter-than-feared impact on the UK economy so far, the fact remains that the UK is currently still part of the EU, and Brexit has yet to happen. Further, the form Brexit will take - and even when it will happen - remain unknown. Although prime minister May has set a March deadline to trigger Article 50, and more details on her exit plans have recently emerged, the outcome of a Supreme Court case into whether MPs should have to vote on the procedure is not due until the end of January.

With this in mind, TechUK's policy director - and Brexit expert - Charlotte Holloway said that there are many things the channel and the technology sector as a whole should be concerning themselves with as the Brexit process pans out.

"There will be some serious challenges coming through and we're all waiting to see what the format for the government's plan on Brexit will look like," she told CRN.

"We have been very clear that we need a transitionary agreement of the rules and regulations which is harmonised to the benefit of tech companies that operate across Europe. These are the result of decades of work and our fear is that if there isn't a smooth, transitionary agreement, and the UK has to resort to WTO rules, it could present a landing for the UK economy and for tech. Digital supply chains are very deeply integrated and those harmonised rules are very important for consistency of business operations."

She said there are the "big three" things the technology industry ought to be thinking about as Brexit unfolds: access to the single market; the skills gap; and the movement of data.

"[We need the] maximum possible access to reach that market of scale," she said. "That's the way that UK tech companies expand and grow across borders. Yes, there will be new opportunities with trading relationships around the world, but Europe is the main market for tech exports currently and we want that trend to continue.

"The UK has been fantastically influential in shaping the Digital Single Market and it's a mixed bag, but if we get it right, there are big opportunities out there.

"It won't surprise you to hear me say that access to talent has been an issue for tech companies before Brexit and that concern has increased. Depending on the type of company you are, there are trends around the makeup of European talent in those companies. The gap is set only to increase by 2020 so there are big questions about how we fill that.

"Thirdly for us is that tech and digital are all underpinned by data and how data flows. We're really keen to see a robust legal environment where data can flow seamlessly, safely and securely between Europe and the UK. We've had a big piece of regulation - the GDPR - which will affect UK companies and they will have to make necessary arrangements to prepare for that coming into force. We want consistent and interoperable data rules between the UK and Europe. There are some big questions about how that will be achieved."

Are you listening?

No UK industry is immune from the impact of Brexit, whether it be for the better or worse. With that in mind, it is understandable that the government is under pressure from all angles and all industries to do what is right for them. Holloway said the tech industry accounts for about 15 per cent of the UK's GDP, meaning that when it speaks, the government listens.

"We've been getting a good and positive reception given our contribution to the economy," she said. "[Tech contributes to the economy] in terms of hard GDP but also in the acknowledgement from the chancellor Philip Hammond that he really gets why tech is important for the UK, not just as a sector in its own right but in terms of what it does for the rest of the economy.

"A big bit of our work as TechUK is [working out how] we make sure tech and digital are at the heart of the industrial strategy, so we're not just talking about a particular technology, we're thinking about what it gives the rest of the economy across the piece. You can't look at an industrial strategy without thinking of it hand in hand with a Brexit that works for tech and for the digital economy."

She added that incentives for research and development activity and greater investment in the domestic digital skills agenda are essentials for the government when considering Brexit, as well as how to stimulate market demand for emerging technologies such as IoT, smart cities and autonomous vehicles.

She reiterated that it is still early days when it comes to Brexit.

"The initial reaction after the vote was that it certainly wasn't the result the majority of industry or our members wanted," she said. "But that said, there's been a real ‘keep calm and code on' spirit in the start-up community and that's felt across the tech community at large. Yes, we need a frank assessment of what the potential impacts are; yes, we need to ensure we have a frank and open dialogue with government. It's still early days."

Lawrence Jones, chief executive of UKFast, said that although he was a Remainer, the impact of Brexit is currently not as bad as expected. He said 2016 has been the best year his firm has had.

"We were naturally nervous with the Brexit [vote] and I don't think any economy ever is very settled when there is huge uncertainty," he said. "There is a little bit of recovery - the pound is recovering, although it's still a far cry from where it was - and hopefully, step by step, people will realise just how strong Britain is as a nation. We did two of the biggest deals we've ever done in that Brexit [vote] quarter, so it didn't slow down. We're an interesting business because we see from very early on what's happening. We sell to 5,000 small businesses and they're the people who are hit the first. If they're nervous [we feel it]. When the recession happened a few years ago, we felt it immediately. The opposite is happening at the moment. It feels as though there is a spring in their step."