Like with many other things, Britain’s decision to leave the EU is likely to have an impact on its rising tech industry.
As of yet it’s not a clear-cut case of whether Brexit’s effect will be positive or negative. It could be a bit of both.
One Brexit-related policy that could have an impact is the government’s promise to cut corporate taxes again.
After the previous Chancellor George Osborne had already slashed the business tax rate from 28% to 20%, his successor Philip Hammond now aims to cut the new rate in half.
That’s an interesting prospect for any company and could therefore attract even more companies to set up shop in the UK.
Plus, with companies like Apple, Facebook and Google planning to move to London, we could see their competitors move here too to take advantage of Britain’s new booming tech industry and the low tax climate.
And then there’s the fall in the pound’s value, which is likely to make UK companies even more attractive to foreign investors.
Bigger firms are now able to get a stake in promising UK tech companies on the cheap. Britain can therefore expect an increase in foreign takeovers.
Let’s consider the positive side of this first. It means foreign investment will continue to flow into the country and the government will find that very reassuring.
When Japanese multinational Softbank acquired UK microchip designers ARM in July, the deal was hailed by the Prime Minister and the Chancellor. They saw it as proof that the British economy can still be successful after leaving the EU.
As long as money is flowing in and businesses are allowed to develop further in Britain, the UK tech industry can keep growing. In this sense foreign investments could be beneficial.
However, there’s a clear downside to foreign takeovers too.
British companies swallowed up by foreign businesses from, for example, the US, China, and Japan, lose their independence.
Big foreign companies with a major stake in UK tech firms could prioritise their own activities over those of their junior partners.
This might lead to a brain drain with Britain’s brightest minds moving abroad to work for big multinationals.
Since Apple became one of the main shareholders of UK chip designer Imagination Technologies, it’s been poaching that company’s employees.
In short, the cheaper pound could substantially increase foreign involvement in UK tech companies.
But this risks turning Britain into a talent pool for places like Silicon Valley in the same way the Dutch Eredivisie sees its best footballers move to the Premier League all the time.
This would harm the development of Britain’s own tech industry and impede the growth of UK companies.
One more industry that needs highlighting is fintech.
As I mentioned on Monday, the fintech industry will be closely watching the Brexit talks between Britain and the EU.
London’s leading role in finance has been instrumental in its success and an important reason for companies in this subsector to create a London base. Right now their future looks a bit uncertain.
Many finance jobs could move to other European cities if Britain loses its euro-denominated clearing activities and passporting rights.
This would adversely affect the British fintech industry, which hopes that Britain’s finance sector gets through Brexit unscathed.
Losing free movement would be a major blow to Britain’s tech industry in general.
Tech has thrived because of its ability to hire bright minds from Europe. If they’re no longer able to recruit freely from the continent, it could be a strain on the industry’s activities.
Britain’s developed into a tech hub in recent years and it looks like it may still be a while before the boom in British tech runs out of steam.
Depending on its outcome, Brexit could accelerate or decelerate this trend.