British EU Exit May Come With Silver Lining for Global Tech Industry

 
 
By Wayne Rash  |  Posted 2016-06-25 Print this article Print
 
 
 
 
 
 
 
British EU Vote

NEWS ANALYSIS: The vote by the British people to leave the European Union is causing much hand-wringing at home and abroad, but nobody actually knows what effects the decision will have on the global tech industry.

When a majority of the citizens of the United Kingdom voted to withdraw from the European Union, the outcome seemed to be a shock to nearly everyone.

But as soon as the votes were counted, all sorts of pronouncements were rapidly aired, nearly all without any basis in fact. The reason for the lack of facts is that major national and political secessions are fairly rare in Western history.

Right now, the financial communities in the United Kingdom and around world are dreading the onset of (gasp) uncertainty. Because so much of the financial and business community failed to think of a Plan B, they're now facing the unexpected. That uncertain future is generating all sorts of doomsday predictions, all prefixed with "could be" or "might" or other indefinite qualifiers.

But the reality is that in some sectors at least, notably the tech sector in the United Kingdom, there's plenty of room for cheer. Likewise, for technology companies in the United States, there's a lot to hope for, not the least of which is the emergence of a newly independent trading partner freed from the frustrations and regulations that come with dealing with continental Europe.

But there is also a downside for U.S. tech companies that will come from a Europe, unfettered by any moderating influence from the United Kingdom that will feel itself free to impose whatever restrictive regulations that the 27 remaining member nations decide to impose. This means that Europe's unyielding privacy rules that are already hampering business on each side of the Atlantic will likely get worse. Border restrictions on the movement of data, already both tough and arbitrary, will likely get more so.

But balancing that potentially will be greater access to British markets for U.S. tech companies, and perhaps even more so, greater access to U.S. markets by companies in the United Kingdom. Venture capitalist Marc Andreessen indicates in a Tweet that he thinks leaving the European Union will make the United Kingdom more attractive than it is now for investment.

Part of the reason that the United Kingdom may be more attractive is that it will be free from the crushing bureaucracy that plagues Europe, which already makes regulatory changes and reforms of any kind glacially show. Likewise, the preoccupation with privacy that overlays data transfer in Europe, especially in Germany, makes it very expensive to use data-driven services, while at the same time, making those services less effective.

This is not to suggest that Germany and to a lesser extent a few other countries don't have reasons to be protective of their privacy, because they do. They've suffered nearly a century of wars, genocide, oppressive governments and pervasive surveillance in which spies, including your own neighbors, were everywhere. But the fact is that the world has changed, and those fears belong to yesterday, instead of being forced on their neighbors and holding back their development.

For its part, the United Kingdom has suffered under a concentrated attempt by Europe to end many of its traditions, ranging from units of measure to control of immigration. But now the United Kingdom, which has one of the most vibrant tech sectors in Europe and the world, is in a position to break free of the restrictions of Europe's past and really begin to blossom.

Part of the freedom for growth comes from some basic changes in the economies in Britain and the world. The British pound has dropped significantly in comparison to the U.S. dollar, for example. This means that products from the United Kingdom, and priced in pounds, have suddenly become cheaper, in turn making them more competitive with the United States and China.

Likewise, technology services, ranging from call center staffing, tech support, consulting and design services, are also much cheaper. This translates into more technology jobs for the United Kingdom at the expense of continental Europe where labor costs remain high.

A potential, perhaps likely, outcome of the British exit from the European Union is that the United Kingdom will turn more to the United States, rather than Europe, for its business and economic relationships. Given the already-close relations between the United States and the United Kingdom, this could benefit both nations, and it will certainly benefit tech industries in both.

For U.S. tech companies, a more welcoming market in the United Kingdom would be a relief. The United Kingdom already has a reputation as the country in the European region where high-tech innovation is the strongest, giving U.S. firms a supply of engineering talent and vision. Meanwhile, having a more open market for U.S. goods in the United Kingdom will give U.S. companies more opportunity.

But as rosy as this vision might seem, it's not a done deal. First of all, the vote on June 23 was just the first step. Next comes up to two years of negotiations on their commercial and trade relationships, on immigration rules and on the infinite number of details that must be wrapped up before the U.K. exit becomes real.

During that two-year period, there really will be considerable uncertainty and that can affect long-term business contracts and relationships where the outcome may not be totally clear for a while. But that's not the same as total chaos, which is what seems to be on the minds of many who are predicting doom.

It's also important to keep in mind that part of what makes the technology business so important is because it's disruptive, and disruption creates uncertainty too. In this instance, uncertainty is a benefit to the technology industry and that's one reason the British exit is probably not a bad thing.

 
 
 
 
 
 
 
 
 
 
 
 
 

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