A Post-Brexit Tech Economy
Britain has voted to leave the European Union (EU) after 43 years of membership, with 17.4 million voting to leave in the referendum vs. 16.1 million voting to remain. The Leave campaign won by 52 percent vs. 48 percent vote.
This certainly comes as a shock. And the economic and political impact is swift:
- Prime Minister David Cameron, who favored remaining in the EU, announced he would resign by October as his Conservative Party finds a new leader
- Financial Services Commissioner of the EU executive, Jonathan Hill resigns, and nearly half of the members leave the Labour Shadow Cabinet
- The value of the British pound fell from $1.50 to $1.36 - at one point it hit $1.33, a fall of more than 10% and the lowest it had been since 1985, according to BBC
- The Financial Times Stock Exchange 100 (FTSE) initially fell 8% but recovered to a 2.5% decrease
- Investors fled risky assets, turning to the dollar and the yen, according to NYTimes (although from Tokyo to London to New York, stocks have fallen)
The NYTimes predicts banks will shift a significant number of jobs from Britain to other financial centers in the EU, including Paris, Frankfurt, Dublin and Amsterdam. That includes major banks such as JPMorgan Chase and Citigroup that have vocalized that an exit would result in transferring their operations elsewhere.
One reason for the move may be that major banks and tech firms will have to replace many engineers that are currently employed and who may no longer be able to work in the UK, if the UK chooses to withdraw from the freedom of movement law granted by current EU legislation, which allows citizens the freedom to travel and settle in other member states, according to BBC.
It’s possible the UK could negotiate to keep the freedom of movement post-Brexit, which would leave 3 million EU immigrants currently in the UK and 1.2 British migrants abroad unaffected.
What does this mean for the tech industry at large? From a variety of sources, it all appears to be speculation at this point. We won’t truly know the real ramifications until two years from now when the process of separation begins after Britain invokes an agreement called Article 50, as per the EU’s governing treaty that keeps existing trade and immigration rules in place for the time being.
There are the concerns around restricting the UK’s access to the European market, which can make it difficult for UK businesses to stay competitive in a global market. London’s tech sector largely opposed the exit - 87% according to a survey of members of Tech London Advocates, 3,000 senior members of the city’s tech scene, as reported in IBTimes.co.uk.
The reasons include the inability to sell to customers in the EU, attract talent from outside of the UK, and gain cooperation from international companies. Another concern is that fewer entrepreneurs will come to the UK to launch startups - there might be better chance of success in a different European market, such as Berlin, according to TechCrunch.
It may also make it more difficult to hire tech talent from other countries in the EU, such as France and Eastern Europe, as there is already a shortage of technical talent in Britain. There’s also worry that this exit will introduce restrictions and more red tape around the work visa process, should the UK withdraw from the freedom of movement law as aforementioned.
Ultimately, there’s a lot of uncertainty in the industry and current world economy as we wait for the dust to settle.