Following the UK's vote to leave the European Union, we consider the potential implications for the technology sector.
The impact on the technology sector will only become clear when the UK's relationship with the EU is coherently defined. A key area for the technology industry is, however, the regulatory environment, where the UK leads the way in developing a regulatory context designed to enable technology businesses to flourish.
The regulatory environment has seen recent initiatives in the Fintech arena with the leadership of the FCA, with Project Innovate and Regtech (regulation technology) initiatives accelerating open competition, as well as with the UK's Open Banking API now aligned to Europe's Payment Services Directive, and a focus on implementing the Financial Advice Market Review findings.
The telecoms sector will be assessing what impact there may be on the regulatory environment surrounding consolidation, investment and pricing, with the UK telecoms regulator Ofcom and the UK's Competition and Markets Authority likely to exercise their powers without, or at least with less, recourse to the European Commission's stance on such matters in the UK.
Trade implications will also be important for the technology sector post Brexit, with a particular focus on the European Commission's implementation of its Digital Single Market strategy, which seeks to harmonize the rules across the region regarding the distribution of digital services/online market places. The evolving rules are designed to protect intellectual property, safeguard consumer data, improve cyber-security, eliminate mobile phone roaming charges and end country-by-country restrictions on content such as film and TV shows.
Prospective renegotiations of UK-EU trade agreements will need to take into account EU regulatory policy goals within the Digital Single Market strategy, while global investors will clearly monitor the influence the evolving regulatory environment may have on the attractiveness of UK technology businesses compared with EU-domiciled counterparts. There is a prospect of capital flight from the UK to mainland Europe or other global trading centres if a negotiated settlement leads to heightened barriers for UK-EU e-commerce.
Another key concern for technology companies and investors will be what impact Brexit may have on access to talent. With immigration a major issue in the UK referendum and the EU emphasising that the UK must honour the principle of free movement of people if it wants to retain access to the single market; the free movement of digital/tech talent (such as developers and engineers) will form part of complex, wider negotiations.
Post-Brexit, technology sector businesses will be keenly monitoring any regulatory shifts that may limit the roll-out of their products and services between the UK and European markets. It would be both prudent and advisable for businesses to think about the following issues:
- Monitoring any changes to 'passporting' regulations that facilitate access to products and services across the European Economic Area, and
- Keeping a close eye on evolving EU data protection laws and any impact this may have on transaction costs for cross-border business.
For more detailed analysis of the issues, please contact your usual DLA Piper contact.