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Why Brexit Would Be A Disaster For UK Tech

Aside from political ramifications, an EU exit could cripple UK tech growth

16Mar

The date has been set. On June 23rd, the UK will vote in David Cameron's long-promised referendum regarding the continued membership of the EU. The notion of Brexit has been brewing for some time, but only on the fringes, and a move to leave the EU seemed unlikely. However, the migration crisis, difficulties with the euro and a strong 'leave' campaign have narrowed the polls, and June's referendum now seems entirely unpredictable.

Nigel Farage is in part responsible; the popularity of his and UKIP's exit-focused campaign in the European elections has shocked Conservative backbenchers into taking a harder stance against Brussels. And Cameron's inability to properly keep unrest under control - asking his party to 'stop banging on about Europe' is perhaps not sophisticated enough a strategy - has Britain perilously close to an exit decision.

Aside from the baying of those seduced by Farage's charisma, arguments to leave the EU are limited in both their number and their legitimacy. Freedom in the global economy is perhaps Brexit's loudest argument, but the majority of UK business is, generally, rallied against it. In tech, a decision to leave could have serious negative repercussions, and the sentiment among business leaders in the industry reflects that. According to a survey by technology industry trade body techUK, a huge 70% of tech companies in Britain favour remaining within the EU; just 15% are in favour of leaving, with the remaining 15% undecided. It's an argument that hasn't been sufficiently made by the 'remain' campaign; the opinion of successful business leaders should, probably, be championed. Of those that supported remaining, 70% believed that Britain's EU membership makes the UK both more competitive and more attractive a prospect for international investors, while three quarters believe that membership allows companies a better deal on trading relationships.

TechUK CEO Julian David highlighted tech's place as the UK's fasting-growing job creator. 'UK tech is thriving, creating jobs almost three times faster than the rest of the economy,' David said. 'The vast majority of our members say that being in the EU supports that growth. Open markets and cooperation are good for business. This is not about fear, it is about opportunity -- a market of 500 million consumers.' 42% of those polled believed that EU membership created more jobs, and if tech is to continue its rapid expansion and sizeable contribution, Brexit must be avoided. David also pointed out that, though the promise of some complete autonomy for UK business is appealing, Brexit would actually do little to alleviate the apparent frictions. 'Most of these companies, large and small, have customers or suppliers across the EU,' he added. 'They are saying they will still have to comply with EU rules, whatever the UK decides on 23rd June. A British exit would mean the UK giving up control over how these rules are set. That could put UK business at a real disadvantage.'

The argument for increased flexibility is limited, and flounders when the negatives are considered. Flexibility in the market could be achieved, yes, but at the cost of a loss of freedom of movement between the UK and Europe. Put simply, Brexit would exacerbate the already problematic skills gap in UK tech. EU membership has been an alleviating factor, and a report from SJD Accountancy in 2015 found a 13% increase in EU talent seeking tech work in Britain. The skills gap is expected to grow, and moving to what would be a Tier 2 visa system would only put further restrictions on an already limited pool looking to bring their talent to the UK. If talent cannot be sourced from within Europe, companies will be forced to outsource their work to other countries, and the burgeoning Asian tech hubs will offer enough to see Britain fall behind and betray what has up until now been positive progress.

And the benefits of EU membership extend far further than matters of personnel. A good case study for the positive effect of the EU on UK digital business is Manchester's The Sharp Project. Newton Heath's digital business hub was built on the back of a £7 million EU grant, and the centre - made up of repurposed shipping containers - has gone on to add a GVA of £32.6 million a year to the local economy, providing 1,000 jobs. The creative and tech centre is a shining example of the positives of collaboration between the UK and the EU, and Manchester is now recognized as the UK's second city in the digital sector. Further projects could face difficulties with funding if access to the EU's £350 million recyclable loan fund - designed to aid building in cities - is lost. Manchester Science Park was made possible by the fund, and exciting projects such as the development of the Oxford Road corridor into a hub of tech and innovation could stall if Brexit succeeds.

Brexit presents uncertainty for almost every industry in the UK. The 'leave' campaign is supported by the majority of the UK's right wing media and, according to the polls, public opinion is split. In the world of tech, though, leaders are near-unanimous in their rejection of Brexit, and many fingers will be crossed when the results of June 23rd are revealed.

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