The referendum by the people of the United Kingdom to exit the European Union–the Brexit–has arguably been the biggest political event of 2016. In the wake of the decision, UK Prime Minister David Cameron announced his decision to step down, Scotland and Ireland are considering whether to declare independence and rejoin the EU, and other European countries are considering their own referendums.
Despite the massive political and economic implications of this event, it will also affect businesses around the world. We put together a list of some of the top questions you may be asking to better understand how the Brexit decision will impact your business.
SEE: Brexit: 5 ways the UK leaving the EU will affect tech firms (TechRepublic)
1. When will this take effect?
As the panic sets in, many business are wondering what this means right now, how it changes business practices in the moment. The answer is pretty simple.
“Right now, it means nothing,” said John Lovelock, a chief forecaster for Gartner. “And, this is really the important piece to get out in that counter-hype. Nothing has happened. Nobody knows what will happen. Nobody can know what will happen.”
Basically, what happened is that the UK voted to leave the EU, after David Cameron steps down this fall, there will be a new prime minister who, upon replacing Cameron, will go have to go to the EU and enact Article 50–the formal intention to withdraw from the EU. This triggers a two-year period of negotiation as the UK prepares to exit. The two years will likely start in October, when the new prime minister takes office.
“So, for the next two years plus, there’s no change in how you would deal with a UK organization,” Lovelock said.
2. How can I prepare my business?
There isn’t much you can do yet, but there are a few things that can get you ahead of the curve.
“You can look at your 3-5 year strategic plan because that’s going to have to be adjusted for the fact that the UK will have a new relationship with the EU, we just still don’t know what it’s going to be,” Lovelock said.
Try to account for any changes that could come with the realization of the Brexit in 2018. If you work with the British government, for example, take a look at your SLAs and existing contracts to figure what, if anything, might change. If you have the resources, you should hire or appoint someone to manage the transition for your company.
“Anybody selling IT product, services, or other offerings really should be setting up an Office of the Brexit,” Lovelock said.
SEE: The Brexit dilemma: Will London’s start-ups stay or go? (TechRepublic cover story)
3. What happens to the talent pool?
How will the Brexit affect the available talent in the UK? Laura Koetzle, vice president and group director for Forrester, puts its simply: “Digital and customer-facing talent will migrate out of the UK.”
London has one of the most diverse and strongest talent pools in the UK, it’s unclear if that same talent will want to stay in light of the Brexit decision. This is further complicated by the millions of EU nationals living and working in the UK, and potential immigrants who were looking to move to the area.
“Uncertainty over the UK’s future immigration laws (‘who will have the right to stay?’) will both drive footloose talent to look for jobs abroad and dissuade others from coming, and firms will struggle with new and likely more difficult work visa regimes,” Koetzle said.
Talent shortages will be felt especially hard in retail, hospitality, healthcare, and financial services, Koetzle said. Additionally, developers and engineers will be even harder to recruit than they are now. Businesses should start planning for these shortages now, because many employees won’t wait for the end of the two years to begin looking for other options.
“In the interim, it’s not unreasonable to expect that some of the new hires, some of the skilled labor from the EU, may no longer be choosing the UK as a destination of preference, given the uncertainty,” Lovelock said.
And, what about all the great startups in London and surround areas? Say goodbye, because they’re all heading to Amsterdam, Barcelona, Berlin, and Stockholm, Koetzle said.
4. Does this affect spending?
Short answer: Yes. Environments of uncertainty are always bad for spending, and Lovelock said that Gartner is downgrading the UK spending forecast in light of the decision.
“During uncertainty, organizations stick their hands back in their pockets,” Lovelock said.
Discretionary spending and large IT initiatives will likely slow. Big tech buying decisions will probably be put on hold as well, Koetzle said, at least until the dust settles from the Brexit. Of course, how that eventually pans out after the exit is finalized two years from now will be the determining factor in whether spending will bounce back.
So, if you have large IT contracts with British companies, be cautious about your projections going into 2018 and beyond. Start planning for slow downs in 2017 and begin diversifying your client base if you can. Koetzle said Forrester predicts that the 2017 UK tech market growth will be negative, with spending falling by 3-5%.
5. Does this affect pricing?
If you’re a vendor, whether based in the UK or selling to the UK, you will need to take a look at your pricing and how it might change.
“Products and services that are sold into the UK have to be re-valuated on their new cost basis, their margin expectations, and their competitive positioning,” Lovelock said.
Fortunately, 2016 is halfway over and the momentum built by tech projects and initiatives will carry over into next year, Koetzle said. Growth will still be positive in 2016, she said, but investments and pricing plans will be more cautious in the coming year and heading into 2018.
So, what does that mean about the change in prices? It means they’re going up.
“The drop in the value of the British Pound, which is already happening will, if sustained, make imported tech goods and services much more expensive as vendors change their price lists to the new exchange rates,” Koetzle said.
6. How will data privacy issues be handled in the UK?
One of the biggest concerns in the tech sector is how British data will be handled in the wake of the Brexit. For the next two years, though, not much will change.
“They’re still in the EU, they still respond to the same legislation, they still will comply with the data privacy act of the EU,” Lovelock said.
Still, that doesn’t give us a clear picture of what will happen once the UK does indeed exit. Koetzle said that they have a few options.
“When the UK exits the EU, it will have to either: a) become a trusted entity like Canada or Switzerland; or b) pass new privacy laws that meet the requirements of the EU General Data Protection Regulation (GDPR),” Koetzle said. “If the UK does neither of those, firms operating in the UK will need to repatriate data to EU data centers. Additionally, EU companies will now demand that their cloud vendors move data out of the UK and into EU data centers to comply with the EU GDPR.”
7. How does this affect me as a tech worker?
Without a doubt, businesses should be seeking to reassure key employees that it is still worthwhile to work in the UK, Lovelock said. Whether or not that is true depends on how the next two years play out and what spending looks like. If spending is affected dramatically, they could leads to layoffs.
SEE: Employee termination policy template (Tech Pro Research)
If you are a freelance or contract employee, you are, in-effect, an enterprise. So you become your own Office of the Brexit. As negotiations get under way, pay close attention–especially if you are an EU national from another country.
“Whether they will still be allowed to work in the UK under the current terms and conditions is something that will be negotiated over two years,” Lovelock said.
If you’re risk tolerant, Lovelock said, ride out the two years and see how it pans out. If you are risk averse, though, you may want to look for another country to operate out of.
8. What will be the most affected industries?
Any change affects one party more than the others. In the case of the Brexit, financial services, which is also the largest export from Britain to Europe, could be hit the hardest.
“Now, the UK’s banks and other financial services firms may lose access to the ‘passport’ rule that allows financial firms regulated in one EU country to operate in every other EU country,” Koetzle said. “UK banks will need to spend lots of money figuring out how to operate in Europe and comply with new rules, which will depress their ability to invest in technology innovation.”
In the post-Brexit era, the fintech area will definitely be shaken up, along with many other markets. How much so, though, remains to be seen.