There is broad uncertainty simmering within the UK’s Information Technology sector and for good reason. The looming no-deal Brexit scenario is fast becoming a possible reality. How will this impact one of the UK’s most innovative and economically successful sectors? It is a mixed bag for the UK tech sector, when Apple’s CEO states that everything will be “just fine” after Brexit, you need to query whether SME digital startups will be ‘just fine’ or is he talking about the blue chip giants? However, the flip side is that in reality six per cent of the UK’s IT sector are European citizens whose futures are uncertain in a post-Brexit environment.
Here’s What This Infinity IT Solutions Insight Will Focus On
This article will explore the dynamics of Brexit and how it could impact the UK’s Information Technology sector. We will evaluate four key areas:
- Sourcing & Procurement Difficulties
- Price Increases without the Single Market
The UK’s IT sector is worth £185 billion pounds. It has created clustered tech business successes from Old Street in London to Burnley in Lancashire. The sector employs, directly and indirectly, nearly 1,2 million people. The high levels of employment (and therein the low levels of unemployment) has created a skills gap in the UK – this is a problem that has become more vocal as the UK leads closer to March 2019. How will Brexit impact one of the fastest growing sectors in the UK?
When the UK leaves the EU it will also leave the Single Market. This market of nearly half a billion citizens will become more problematic to access and as such will make procurement channels that are decades old redundant as new tariffs and bureaucracy will impose massive delays on Just-In-Time tech supply chains. This will create disruptive delays as regulatory and taxation changes will impact importers and exporters alike.
Even before Brexit has occurred, the mere democratic undertaking itself has impacted prices. The collapse of the Sterling has led to higher price inflation. This has been evidenced by the Consumer Price Index which has steadily increased since June 2016. The price of tech has already increased by 30% since the July 2016 referendum. The collapse of Sterling has led to a sharp increase in PC components but direct digital costs could spiral once the UK leaves the European Union as well.
The effect of Brexit on the UK’s Information Technology sector is multifaceted and could be catastrophic. Let us explore how these three themes will be impacted by the UK’s decision to leave the EU? How will IT leadership react to changing IT infrastructure demands, staffing diversity and more once the UK’s exit from the EU is agreed?
Staffing – How Brexit Will Impact IT Professionals
The UK is currently in the midst of a major ICT skills shortage. Brexit hasn’t happened yet and the UK doesn’t have enough ‘talent’ to fill the vacancies posted by IT employers. Companies need talented people to fill vacancies but there is a triumvirate of pressures – with less and less students taking ICT subjects at post-16 levels, a Tier 2 VISA cap and Brexit uncertainty closing the door on new EU talent all of these competing challenges will place great pressure on the UK in a post-Brexit environment.
According to research, approximately 6% of tech industry workers are from the EU. The fear of losing such a percentile next March has focussed policy-makers’ attention. Theresa Mayhas stated that she wants to make sure that EU citizens rights, for those who currently reside in the UK, are “safeguarded.” However, this doesn’t fix the issue at hand. There is an ‘on-going’ skills shortage and the demand requires continuous talent to be channelled into the UK to help bridge the major talent gap in order to make sure UK tech grows, diversifies and strengthens in a post-Brexit landscape. Merely protecting current EU citizens stymies the continuous inflow of tech talent from the EU post-Brexit.
Sourcing & Procurement Issues – How Brexit Will Impact IT Supply Chains
The IT estate as a construct is based on continuous management, nurturing and development. This means procuring technology when the life-cycles evolve. From structural technological changes to ever-changing threat analysis from cyber-crime, understanding change and planning for change requires access to a functional procurement marketplace.
Reutershas already reported on British companies who have been pushed aside during global industrial project collaboration due to the “uncertainty of Brexit.” The agency argue the core reason is as follows:
“There are signs that many EU companies are holding back on using British firms in their supply chains – which can involve parts criss-crossing borders several times – because of what they still don’t know about tariffs, regulations and the potential for costly delays at the border.”
Price Increases without The Single Market – How Brexit will make digital services more expensive
The loss of EU markets also connects with buying services and products from the EU after Brexit. The use of digital services on the continent – including Microsoft Azure, Office 365 and other Microsoft services, who are incorporated in the Netherlands – will see a new VAT hike for UK consumers who will have to pay duty upfront for services and products – including digital services and goods. This will create additional cash flow concerns for businesses.
The obvious outcome of this will be price increases making British goods undesirable. Some argue the falling price of Sterling could offset this experience. However, the reality is simple. If Britain leaves without equitable terms, the cost of ‘doing business’ with EU tech companies will increase, components and digital technology prices will increase and the shortages in staffing will fuel increases in wage bills.
What Can You Do To Protect Your Business and IT Infrastructure?
By working with a trusted information technology and communications services vendor, like Infinity IT Solutions, you could weather the initial post-Brexit disruption. By collaborating more with your IT services and estate, you can cut costs by outsourcing functions and using trusted procurement channels used by Infinity to help provide stability for your business IT needs. There is still time to ‘future-proof’, the backstop (an extension of Britain’s departure from the EU will allow UK businesses until 2020 to remain as single market members. Work with a trusted provider, build your capacity and work with a business who understands digital and technological scalability – we can help you focus on success during these treacherous Brexit negotiations.