I don’t think that it will be a surprise that two issues come out every time. The first, and dominant issue, is access to skills and talent. The general flavour of comment I get is that there is no European economy that is large enough to be self-sufficient in all the skills required around IT. Indeed, the US companies investing in Europe put access to skills at the centre of their case. The US, a much larger economy, cannot itself be self-sufficient in IT skills.
Within IT data protection, the new GDPR regulations due in 2018 seems to be the major problem. Two former colleagues have estimated that if regulatory equivalence is lost, then full separation of a UK cloud infrastructure from an EU infrastructure could add 6-8% on costs for their organisations on top of any currency movements.
Regulatory issues appear in each sector and often seem to have a combinatorial consequence adding to uncertainty. The most complex example explained to me yet is in pharmaceutical regulations. A new clinical trial, starting in 2017 probably will not reach licensing approval till post Brexit, so regulatory uncertainty is an issue. Given the sensitivity over patient data, the interaction between sectoral regulation and GDPR is far from trivial.
Both issues have been well aired and there are active groups in these fields. I wish them well.
What I have found rising up the agenda has been less debated, so I wish to focus on what I believe needs to be understood if Brexit is to be good for BrexIT.
There appears to be a growing belief that trade deals can be done at a sectoral level. There are certain sectors which the UK believes are central to the new relationship.
Philip Hammond has stated that IT is one such sector. Agriculture, Pharmaceuticals and Automotive are also discussed with Financial Services being the biggest prize.
With all Treaties, the devil is in the detail and it is important that there is a clear understanding of both principles and the unintended consequences of the detail as expressed.
I was reminded that in 1973, shortly after we joined the EEC that the first Arpanet Node outside the US was held up in customs because they couldn’t work out what it was for VAT purposes.
Compared to the 1970s, the UK economy has moved from vertically integrated organisations working in well-defined sectors, to networks of supply chains and ecosystems of organisations working across national boundaries. Furthermore, I would argue that a modern economy is more innovation intensive than the early 70s.
One former colleague was at a briefing on financial services - the event focussed on passporting rights. The inevitable question on how to balance freedom of movement with access to the single market was raised. The answers were pretty vague, but one possible interpretation was that bankers might be able to move freely, but not support staff. So, do finance IT people count as support staff? Is fintech FIN or TECH? Maybe fintech is a sector in its own right.
There is plenty of scope here for a bureaucratic nightmare. An organisation with in-house IT may be dealt with in a different way to a company which outsources its IT, if the outsourcer is considered to be in a different sector to its client company. Writing schedules in such a way as to not distort market choices is incredibly difficult.
We live in an interconnected world and IT has blurred boundaries between sectors in a way that is radically transformed from a 1970s economy.
Which sector is a company like Alphabet/Google in? If the Autonomous Car, Search, NEST and other divisions are treated differently, then IT staff in each division could have different movement rights.
My own suspicion is that, for multi sectoral organisations, the likelihood is that IT staff may be transferred to the division with greatest freedom of movement and then seconded back to other divisions. Ways will be found around whatever rules are put in place, that much is certain. Is that acceptable?
One challenging possibility is that the same technology imported/exported for similar purposes could be subject to separate rules. To illustrate, consider an AR/VR peripheral.
One company - say a game company - importing a device might do so as consumer tech, but another as an industrial device. If you think this absurd look at the issues around defence exports. Are night vision goggles defence related or not?
The scope for dispute, let alone fraud is enormous.
Which sector do you consider IoT technologies to be in? Are smart cities to be considered as architectural services or IT? What sector isn’t potentially disrupted by IoT? A few months ago, there was a slot on Farming Today (Radio 4) about the Internet of Peas, no less.
None of this is intended to be a commentary of the rights and wrongs of Brexit. The direction of travel has been set. The examples I have given are at the level at which the regulations will be written. I was exposed to the mind boggling complexity of non-tariff barriers to trade before the creation of the single market.
I gave an after-dinner speech at a conference for people engaged in “trade facilitation”. I was followed by a barn storming, wickedly hilarious speech. The topic was “the importation of hairbrushes”. Think Monty Python’s Cheese shop sketch, written by Kafka to the length of War and Peace. Talk to anyone who was involved in trade facilitation before the single market and the examples I’ve given are far from the most daunting.
In 2017, once negotiations begin and the schedules are being established, it will be easy for the lofty principles to get lost in the minutiae. The difference between a good and a bad brexIT will be determined at this level of detail and more.
One of my former colleagues gave me a good example of the potential problems downstream. He has recently reviewed the potential for autonomous vehicles in agriculture. It is suggested that in the mid-2020s that it might be possible to pick some vegetables without the need for seasonal labour. That potentially addresses one concern over restriction of freedom of movement in the medium term.
However, if the sectoral agreements are concluded in advance of the technology both being available and technologically affordable, the risk is that potentials innovations are stifled by rules written to respect historical silos. Imagine a British company in autonomous agricultural vehicles in the mid 2020’s. It sources its engines from Germany, writes the software in the UK. It 3D prints parts in the UK from a Swiss design. It obtains sensors from France. System assembly and integration is done in the UK. How many sectoral agreements will cover this?
So, for me, the real issue is to determine if these are abstract concerns or real problems.
My suggestion is to frame this as a debate.
Try this: ‘This house, considering the achievements of governments worldwide in achieving the full potential of IT, has no concerns over the UK government’s ability to negotiate an optimum settlement for post Brexit IT.’
Are you brave enough to argue FOR the proposition?
If not, what do we need to do to secure the necessary changes in values and behaviours? Do we know what it is that WE want? What will Brexit mean for BrexIT?
