‘Political high drama’ best explains the last two weeks in the UK as its people voted to leave the EU. But what might this mean for its tech industry?
Over the last ten years the London technology sector has boomed. What once was just a roundabout in East London, Old Street has now become London’s ‘Tech City’. Its surrounding areas have evolved from warehouses into industrial sleek offices for startups and shared working spaces. Being an EU member certainly seems to have had a positive effect on the tech industry. London Tech Advocates, an industry group which represents more than 2,700 senior members of the capital’s tech scene, agrees. A survey of its members showed 87% opposed Brexit.
With an unprecedented level of financial and political uncertainty ahead of us and no similar history which might shed some insight into the effects of leaving, it’s difficult to say what might happen next. As and when Article 50 is invoked and we start our exit of the EU over the course of the next two years, all will become clear. In the meantime here are our predictions of how the tech industry may react in the run-up to the UK’s likely leave date of 2018:
1. Businesses will be more reluctant to invest in technology
The value of the pound has depreciated and companies are in a period of uncertainty. Unless budget spend is absolutely necessary, companies may delay high-investment purchases like hardware until they know they are spending wisely. Longer term projects will get put on hold as companies are wary of recruiting and resumed in 2017 when the UK’s outlook has become much clearer.
2. Businesses will be less able to hire on a talent-only basis
Losing access to hundreds of thousands of EU nationals will be a concern to businesses as it reduces their talent pool. Although there are no limitations on recruiting within the EU for now, from a human standpoint it seems unlikely businesses will want to recruit staff they may not be able to keep in the long-term. A sad outlook.
3. Businesses will look at ways to become more EU friendly
The very nature of being ‘techy’ is to be inventive, work flexibly and solve problems. This may result in companies with higher proportions of staff working from their homes across Europe or UK-based companies relocating their headquarters to a more appealing address somewhere back within the EU.
4. Suppliers will raise their prices
Both Dell and the Chinese smartphone company OnePlus say they will raise their prices in the UK as result of the nation's vote to leave the EU. The depreciation of sterling against the dollar (which component costs are priced in) and other European currencies has a direct impact on the sale price to partners and ultimately, UK customers.
5. Startups could thrive
In good times people stick with what they know and during hard times, people get creative. It’s well known that ingenuity grows from scarcity. Hiscox’s DNA of an Entrepreneur Survey showed that times of recession aren’t all doom and gloom for UK businesses. Startups launched during the last recession were actually found to be more profitable than firms founded during recent times. The abundance of bright grads looking for work at that time often helps success to spring from difficult beginnings.
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