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4 July 2016 | 0

Paul HearnsWell, Brexit is the issue that just keeps on giving!

Last week, as the world settled down to the shock result of the Brexit vote, not only did the Tory leadership race take centre stage, but in another bombshell, Boris Johnson announced he would not contest the leadership and his right hand man Michael Gove said he would.

Today, we have learned that UKIP leader Nigel Farage has announced his resignation again, as he reckons his work is done in the shape of the UK leaving the EU.

Amid all of this are people scrambling to make sense of it all and figure out the implications for their own little patch.

We here at TechPro Towers are obviously interested in tech sector impact, and have speculated on things previously. However, there are other more informed commentators out there, and unfortunately, there is little consensus as to the specific fallout.

In our own coverage here on TechCentral.ie, we have had a small business survey suggest that the majority of . The CompTIA survey (admittedly with a  small sample size) of small and midsize businesses in the UK and found that 53% opposed an exit, 19% were in favour, and the remainder were uncertain. Another story reasoned that there would be little effect on UK data protection law in the short term, as most of their laws and regulations are based on EU principles anyway.

Further speculation suggested that Brexit could cause data privacy headaches for US companies, if the UK decides to go radical on its data privacy laws. However, there was also acknowledgement that this was unlikely.

“Now that the UK is not a part of the EU, the previous baseline directives that were adopted will change,” argued Geeman Yip, CEO of cloud consultancy BitTitan.

However, he also said: “I anticipate (the UK will) structure their privacy and regulatory laws in a fashion similar to the EU.”

But analyst Gartner was already revising spending estimates, based on the result and its immediate aftermath. The Brexit vote lowers the 2016 UK spending estimate between 2% and 5%, moving it into negative territory, said Gartner. It expects UK IT spending to remain negative into next year. The leading reason for the decline is summed up in one word by Gartner analyst John Lovelock: “Uncertainty.”

IDC chimes with Gartner and predicts that there may be a 2% drop in IT spending.

The analyst suggests that there is a 70% chance of what it terms a “challenging transition” where an initial downward drop in UK GDP would be then be tempered by a new relationship in some form of bilaterally negotiated agreement in the medium term.

IDC reckons there is a one in five chance of a “disruptive transition” where contagion in terms of multiple referenda and immense pressure on the EU model which creates further economic uncertainty. IT spend in this scenario would be expected to decline significantly, said IDC, in the short term and would struggle to rebound in the forecast period.

Finally, there is a one in 10 chance of a “swift transition” that assumes strong leadership steps into the existing vacuum and an orderly Brexit process occurring that avoids short-term turmoil and drives economic growth for the UK in the medium term. IT spend is affected mildly in the UK in 2016, IDC reasoned, but rebounds quickly in 2017 and beyond.

Furthermore, the UK Chancellor George Osbourne has now announced plans to drop corporate tax rates to 15% or below to re-invigorate the economy

It is this, perhaps more than anything, that could affect the tech sector in Ireland.

If the UK aggressively reduces corporation tax, alongside other measures to increase foreign direct investment (FDI), then Ireland could lose what was seen as a boon for it in the event of Brexit. With the UK outside of the EU, it was expected that Ireland would be the next best option for tech companies looking in that direction, if not top of the list and only in doubt due to UK competition.

However, if the UK can match or better Ireland’s legendarily low — and often hated — corporate tax rate, then Ireland’s other benefits might be outweighed. There are already fears of a ‘race to the bottom’ in corporate tax, and the issue may focus EU attention on Ireland’s rate again, making for uncomfortable times in the Department of Finance.

 

 

 

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