Shockwaves from the United Kingdom’s decision to leave the European Union continue to reverberate. Markets are volatile and there is uncertainty around the future implications for trade and the free movement of people and capital between the UK and continental Europe.
For the digital economy this brings new opportunities as well as risks. The UK is a leader in digital innovation with a considerable pool of digital talent with the digital tech industries creating £161 billion in turnover and driving growth over 30% faster than the rest of the economy1. It is in a position to build a strong future on these foundations whatever the external economic turbulence.
As in many industries, the immediate concerns will be around future trade deals and tariffs across borders. Although digital products and services are not constrained by physical borders and customs checks, there are concerns that costs could be increased by future tariffs, or by visa requirements for staff working in the UK. This could impact UK digital competitiveness and the time taken to deliver products and services. Moreover, UK exclusion from the European Single Digital Market – an initiative to drive digital adoption and acceptance across the EU through common data protection laws, reduced costs and greater access – presents additional risk.
So what should both traditional and non-traditional businesses with a stake in digital be doing over the coming months to manage the risks and seize the opportunities?
Don’t turn off the tap on your digital initiatives – in many ways, Brexit has sharpened the focus on the benefits that a strong digital foundation brings. While investment in UK digital start-ups may seem more risky for international angel funds and venture capitalists, for the traditional business, digital should still be on the investment agenda. As shown in our recent research, Innovation as Unusual, it is essential to deliver more cost-effective channels to market and innovative products and services that meet the ever-more demanding expectations of customers at home and abroad. It is also clear that organisations that have a mature digital capability are able to adapt and flex quickly in response to market changes as agile delivery principles underpin their operations.
Hold onto your digital talent – the digital economy has driven job creation at a rate 2.8 times faster than the rest of the economy and is powering transformation in both non-traditional and traditional businesses2. Securing digital talent is already a major challenge to growth; technical skills such as app development, software development and data analysis are scarce and in high demand, and jobs in these areas command above average salaries. For this reason, access to international talent has been vital to delivering digital initiatives. 20% of digital tech businesses say that EU countries are an important source of talent3. So any restrictions on the movement of people and loss of easy access to European talent is likely to exacerbate scarcity, drive up competition and increase costs for retaining the best. This may then hinder growth in the sector. However, as digital skills are not necessarily acquired through traditional educational routes, so more job opportunities in this area may help to incentivise people to retrain.
All this underlines the need for policy makers to work to ensure that the UK immigration, visa and tax laws make it an even more attractive proposition for international digital talent and digital businesses alike.
Keep focused on protecting your digital operations – with ever-increasing cyber threats facing organisations and individuals, maintaining digital trust will continue to be critical to all businesses. The EU’s General Data Protection Regulation (GDPR) sets out a harmonised set of data privacy standards and regulations across the EU making it easier for businesses to work together within and trade with the EU. Although, in time, the UK will be required to update its own data protection laws, in the short term nothing will change and, even in the longer term, substantial change is unlikely. With so many businesses operating across borders, especially digital businesses, consistency with the EU approach to encourage and facilitate business with the UK will be a priority for the Information Commissioner’s Office.
In this period of uncertainty, digital needs to be viewed as an opportunity and a way for the UK to maintain a global outlook and to continue to drive growth. It is clear that the inherent agility of digital business models is going to be a key differentiator as organisations look to quickly adapt to the change. That means the digital economy will continue to be key to the success of the UK and that the pre-referendum questions about digital and how it is used within organisations whether to drive change or disruption still apply, and are even more urgent now.
How do you think Brexit will help or hinder our digital economy?
Contact us for expert advice on digital opportunities and challenges, and watch this space for more in-depth insight and analysis on Brexit from our PA Digital experts.
For sector perspectives from around PA – visit our Brexit – the reality page for expert opinions across industries.
1Tech Nation 2016, Tech City UK & Nesta