The Impact of Brexit on Digital Innovation
The Digital Leaders who gathered at Durham County’s cricket ground on a sunny July Thursday reflected on the turbulence stemming from the recent Brexit vote, the possible outcomes – both positive and negative – and the ways in which the North East region and businesses can turn the current situation to their advantage.
In the run up to the referendum, businesses surveyed by the North East of England Chamber of Commerce favoured Remain by a ratio of 2:1. The public result was a huge surprise to the regional business community, resulting in an unprecedented level of widespread uncertainty. However, attendees clearly stated that this situation must improve, and quickly. As one member said, ‘we now have a government and may shortly have an opposition, too’ – a reflection of the muted tone of the debate on the back of unprecedented political upheavals and changes at a senior level.
The Digital Landscape
We were reminded that unlike manufacturing, software is a ‘weightless’ commodity: there are no tariffs on emails. However, through Brexit, trade is likely to be affected by regulatory changes, including: the protection of Intellectual Property currently covered by EU registered patents; the ongoing changes to EU privacy laws with the Privacy Shield and General Data Protection Regulations (GDPR); the privacy elements of the Transatlantic Trade and Investment Partnership (TTIP) which may feature in a bilateral agreement; and the progress of the UK’s own Investigatory Powers Bill (IPB) through Parliament. In spite of these regulations however, it was recognised that pure digital businesses can operate from anywhere. If the EU is seen as a more certain jurisdiction, and one with access to 600m, not 60m, people subject to the same regulations, then telecommuting from the EU may become the norm. There are reports of digital businesses already preparing to relocate. While it would be wonderful to ignore national boundaries in the cloud and operate smoothly across jurisdictions, this is unlikely to happen and is not going to help other sectors, e.g. recruitment where cross-border appointments are paperwork-heavy.
In terms of digital innovation, there are continued opportunities to use digital technologies in traditional sectors such as manufacturing. For example, it was agreed that the current uncertain climate may be enough of a threat to make businesses react and improve their digital infrastructure. To deliver these improvements, though, there has to be a focus on skills development and training within our borders, from primary school upwards. The Digital Leaders wishlist for government included:
The Funding Landscape
Since 2014, the North East has benefited from EU funding to the tune of £450m. The EU has been significant in funding revenue spend, as well as capital, which is essential for digital businesses where their main assets are often skilled people. However, the road to funding approval in the UK is notoriously long, and disproportionately so when compared to other EU countries. We have to be prepared for the funding, as we know it, to cease altogether. The salon asked ‘how would a commercial, independent business react to such a significant external challenge’?
It is likely it would withdraw, restructure, and re-emerge to face the new landscape as a stronger, fitter entity. But how can the North East do this, in the apparent absence of strong leadership? The business membership bodies have already been actively pulling together as one voice, while still servicing the differing needs of their respective membership bases. There is a feeling that businesses will just get on with dealing with change. However, within local government, with twelve councils split across two Local Enterprise Partnerships and a Combined Authority, the strategy seems unclear. Historically, a majority of funding the region has received, has tended to influence the individual strategies of local authorities and other regional public bodies. It’s time to use the regions limited resources to seed fund concepts that have the best chance of success in in the years to come, not fund projects that fit particular funding criteria. The question remains ‘who will lead on this?’ and help join up the dots to grasp opportunities and deliver a wider North East regional strategy?.
The North East’s Digital Leaders challenge our region to drop regional differences and divisions, and unite as a region to compete internationally. Be rational, be positive about the challenge we now face. Never waste a good crisis: the world has changed. We have the opportunity to build on the North East’s proud tradition of world class digital innovation and seed a strong, sustainable economic future for the region.