The UK’s exit from the European Union undoubtedly represents a significant change in the way the international tech community will do business with the country. However, whatever the outcome of Brexit, the UK remains in a strong position with expertise in areas such as AI, IoT, cloud technologies and fintech, to name just a few areas.
Many of the foremost innovators in these technological areas have been nurtured over recent years with large investments and support. Going by the European tech investment league tables – the industry benchmarks for venture capital spending - the UK continues to dominate the European tech scene in spite of political uncertainty: venture capital spending in London‘s tech sector beats that of other major European cities such as Berlin, Stockholm, Amsterdam, Paris and Barcelona. Similarly, the UK also tops the list for number of tech IPOs.
The UK remains an attractive investment
Both inside and outside the EU, the UK is proving that it is losing little of its lustre. This continued appeal is evidenced strongly by the sheer number of businesses looking to start-up and expand in the UK. For instance, Japanese IT services firm NTT Data is to open a new £41m office with 200 jobs set to be created and, within the EU, German fintech giant N26 is looking for a larger piece of the UK fintech market with a doubling of its UK workforce. This list is far from exhaustive.
Indeed, the figures would appear to back this up with general European business investment into the UK remaining strong. In the last year alone $31.1bn of continental money has been poured into UK assets, according to S&P Capital IQ, up from $21.2bn the year previous. Encouragingly, the tech sector also follows this trend with 72 percent of all investment into UK tech companies coming from Europe in 2018. This demonstrates that the UK and European tech sectors remain collaborative and largely interdependent – surely set to remain true once the UK leaves the EU.
Europe’s continued show of confidence in the UK tech scene is likely down to a couple of reasons. Irrespective of Brexit, the UK will continue to be a huge market for investment, with its 66 million potential customers. While on one hand, the global Internet offers companies an opportunity to connect with customers from afar, for businesses to experience sustained success within a specific region, it becomes important to have a regionally relevant presence.
Depending on the needs of any given tech business, they may need UK-centric websites, delivery centers, social media presence, data centers and customer support to deliver this. Tailoring an offering to the UK market requires on-the-ground expertise and, crucially, investment in premises and talent. A UK base may be required to ensure that they’re able to provide services faster and as efficiently as possible.
There are obstacles, but they can be overcome
Ensuring the continued success of the UK market does mean that like minded European businesses will have some obstacles to overcome in the run up to and after Brexit, particularly when it comes to data regulation. As the UK leaves the EU we will no longer share the legal frameworks that we have for decades. However, as EU directives on data protection are built into UK legislation and compliance monitored by the Information Commissioner’s Office, there shouldn‘t be any immediate change.
What the UK’s exit from the EU does mean is that cross-border data transfer, processing and handling of data will have to be reviewed. If UK lawmakers opt to amend existing data legislation in future, tech service providers will need to be ready to ensure that their cross-border data transfer compliance measures are sufficiently robust. This will apply to IT services in any form, including services such as cloud storage solutions, email tools and fully-fledged server infrastructures.
Maintaining investment is key
While we’ll continue to invest in the UK, the uncertainty surrounding the UK’s withdrawal from the EU has provided an obvious business challenge for a company such as ours that is successful across the whole of Europe and the globe. The single market, a common regulatory framework, and a more or less stable political situation have been pillars of the UK tech sector‘s success over the years – we will need to keep a close eye on how this relationship develops.
However, no matter how the political decisions surrounding Brexit unfold, tech companies will need to maintain investment in the UK for their continued success in what is, and will likely continue to be, a highly competitive market. Prospective international tech investors will still see the UK, with its first-rate universities and tech talent, abundant opportunities for collaboration, and relentless search for innovation, as a prime location for their investment.