The fallout of the UK's vote to leave the European Union is just beginning to be understood. In retrospect, it's being realised that the ripples from this one move will spread throughout the globe and impact many industries.
What many may not have considered is that Brexit, as Britain's exit from the EU is called, is a long protracted process that is still complex and requires a deep dive into negotiations on terms.
It's thought that the actual exit will only happen in 2018. Or even 2020, if the Leave faction has its wish. While this may delay the inevitable and the impact until such time as stakeholders are ready for it, it also means a long time of uncertainty as an attempt is made to understand the ground reality of the exit.
The technology sector in the UK and elsewhere wherever connected with the UK will not be immune to the Brexit move. Britain has been gentle on the question of regulations, privacy protection, data flow across borders in Europe, etc. Germany and France, who will now have stronger voices, have had different views and have gone after the tech giants, specially Google, on these issues.
Britain's exit from EU has also thrown London’s future as a hub for tech start-ups into question, with entrepreneurs and investors worried about the long-term access to talent and the single European market. An open flow of talented workers to and from the rest of Europe is what has been important for the UK.
The National Association of Software and Services Companies (Nasscom) termed the Brexit announcement a phase of uncertainty in the near term but a mix of challenges and opportunities in the longer term. According to the association, the Europe market is of prime importance to India. It is the second largest market for the Indian IT-BPM industry, constituting almost 30% of the industry’s export revenue of about $100 billion. The UK plays a key role within this market. In addition to representing a large share of our members’ activity in Europe, many use the UK as a gateway for further investment across the European Union.
Nasscom's initial analysis of the near term impact on technology and services sector includes:
• Likely decline in the value of the British Pound, which could render many existing contracts losing propositions unless they are renegotiated.
• The uncertainty surrounding protracted negotiations on the terms of exit and/or future engagement with EU could impact decision making for large projects.
• Indian IT companies may need to establish separate headquarters/ operations for EU, may lead to some disinvestment from UK.
• Skilled labour mobility across EU and UK could be impacted.
• Changes in the financial system, banks and impact on currency could ensue
“Nasscom urges policy makers in Brussels and London to provide greater clarity and guidance on the next steps as soon as possible, so that our businesses have the certainty they need to continue to invest in UK and Europe”, said NASSCOM President R Chandrashekhar. The initial commentary from the policy makers in UK indicates their commitment to minimise the possible negative impact of this referendum.
In the long term, however, Brexit could lead to strengthening of India-UK economic relationship as UK seeks to compensate for loss of preferential access to EU markets. This could open up new opportunities for UK and India as well. With the existing 800 Indian companies employing 110,000 individuals in the country, a deeper partnership with India may be in Britain’s interest.
Additionally, with UK less dependent on intra-EU immigration into UK, it could become more open to high-skilled immigration from other non-EU countries including India. Further, UK would be under no obligation to adopt restrictive EU data localization norms which it does not subscribe to in their entirety. All these factors could benefit India-UK bilateral economic relations.
“Nasscom will continue to foster, to the extent possible, the strengthening of the UK-India and EU-India relationships, and this is especially the case in the areas of technology trade and all related aspects including mobility of highly-skilled workers.
Currently, a knee-jerk reaction is causing the deepest gloom about the future of the global economy and various industries. But there are also optimists who believe solutions to problems that come up will be worked out.
BW Reporters
Mala Bhargava has been writing on technology well before the advent of internet in Indians and before CDs made their way into computers. Mala writes on technology, social media, startups and fitness. A trained psychologist, she claims that her understanding of psychology helps her understand the human side of technology.
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