What will be the impact of Brexit on the tech sector?

With the impending Brexit starting to look like reality, we looked at how this might impact the tech industry. We found that while there will undoubtedly be changes many regulations may need to stay in place.

Brexit has been a divisive issue in the UK and even though negotiations haven’t even started there have been serious repercussions across the UK and Europe.

"The digital industry works best when we share ideas, methods and have free movement of people so we can attract the best talent to work in our companies. Many of UK’s best tech companies have relied on this to fuel their success. As a service nation, the UK can’t afford to push away talented migrants who add real value both to our society and businesses.

"I consider myself a European and am proud of my multinational team at Studio 24."

Simon Jones, Founder & Managing Director, Studio 24

In the following article we look at how digital EU regulations may need to stay in place and how other impacts of Brexit may affect digital.

EU Regulations

Cookie Regulations

This regulation states websites have to make it clear to users to what cookies are used on a website, this is often interpreted as a cookie warning that now appears on many websites. If the UK remains in the single market it will still need to comply with the EU privacy agenda, this means that cookie warnings are here to stay.

If the UK were to remove cookie notices it would have to re write the privacy rules in the UK’s Privacy and Electronic Communications Regulations. Read our tips on how to meet the cookie regulation at 'clarification on cookie law'

GDPR (EU General Data Protection Regulation Due to launch in 2018)

Similarly the UK needs to continue to comply with European data regulations. So, although you might have assumed that the UK would have no need to comply with this regulation après-Brexit, you’d be wrong.

If an organisation is processing information about a person who is in the EU, then the rules still need to apply regardless of where the organisation is located.

Economic Slowdown

Bloomberg intelligence is forecasting a 2% fall in advertising revenue. Assuming that consumer spending slows down, this may be a sensible forecast. This forecast does sit in between the notion that nothing will change at all and predictions that the economy is about to collapse.

We have also found uncertainty associated with Brexit has caused a slowdown in spending by businesses. It’s as important as ever to focus on what brings real value to your business.

Overall a slowdown in the economy is bound to affect digital as organisations fail to thrive or need to cut costs because of increased import costs.

Impact on Resources

The tech industry attracts many skilled workers, with the need being so large at present lots of positions are sourced from overseas. Much talent in this area comes from university graduates. The education, tech and science sectors are already seeing a drop in applications from EU candidates which is likely to cause future issues.

The Erasmus scheme is a popular programme that supports EU graduates working in other EU countries. Studio 24 have worked with Howest for many years bringing excellent digital students to work in Cambridge. While there is some uncertainty on the future of the Erasmus scheme, since it operates outside the EU there is hope this will continue. However, graduates looking to settle in the UK afterwards may find it is much harder to do so.

Currently the governments earning threshold is £23,000 per annum, put this together with preventative visa costs we could be seeing serious talent shortages, many students would have to leave the country immediately after graduation, instead of finding jobs and taking internships within the UK.

Digital Marketing & PPC

Amongst other repercussions, currency value fluctuations could have a big impact on PPC (Pay Per Click advertising) and the UK’s standing in the global market.

The fall in the value of the Pound would mean that it would be easier for other countries across the world (particularly the US) to compete for UK search terms.

Just as it becomes more expensive to buy goods from the rest of the world into the UK, similarly it becomes cheaper to buy goods and services from the UK. This could in turn push up the CPC of some of the more competitive search terms on UK targeted PPC campaigns.

Repercussions on the charitable sector:

Because we like working with and helping charities as much as we can, we did a little investigation in the affects Brexit may have on the charity sector.

  • Currency: the drop in the value of the pound mean that it might be a bad time to send money overseas. Any grant schemes and funding will see a reduction in their value.
  • EU Funding: charities in the UK receive about 200m per year from EU funding, this has immediately been put at risk, this makes up a total of 0.5% of the sector’s income.
  • European Court of Justice: In the event of withdrawing from the EU, charities will likely loose access to the European Court of Justice as a court of appeal.
  • Shifts in societal demand: In the event of an economic downturn, charities may find that there becomes a greater need for those in financial difficulty or out of work within the UK.

In addition, aspects of the Brexit campaign have undoubtedly caused divisions in our socio- economic fabric due to the affects of a divisive, and at times shameful campaign. Charities may find the need to repair these tears in our communities both among the old, young EU, Non EU and even UK citizens.

For some fantastic advice for charities in the wake of Brexit see: 'What Brexit Means for Charities & What They Can Do'

Overall effect on digital

However, viewing historic evidence, during the last economic crisis in 2008, digital was one of the few sectors to actually benefit.

Large cuts in traditional advertising and a shift of budget spend towards digital resulted in an estimated 5.7% growth in Digital Advertising.

This is likely because the ability to track ROI effectively is so much easier on digital.  This has always been a strong point of digital marketing and makes it much more of a reliable investment during times of economic downturn.

Given these predictions, there is some hope for the digital industry, it may be the best sector to invest in over the next few years. Although we might see a rise in the cost of PPC advertising and potentially be struggling for talent, digital may thrive after all.

Unless someone has a time-machine?

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