^ £/$ over the last 12 months
Prior to today’s formal notification of leaving the EU, the Brexit referendum result immediately impacted the British tech sector, which contributes 10% to the UK economy1.
We’ve already seen the pound slide 17%2, diminishing the benefits of importing and outsourcing, and negatively impacting balance sheets3. In line with such speculation, a National Outsourcing Association (NOA) survey revealed that 73% of the outsourcing industry wanted to remain in a reformed European Union4.
Banks move from London
Changes to the Financial Services sector will drastically change the shape of the UK economy. Barclays, Credit Suisse, Standard Chartered, Bank of America and Bank of China plan to move operational centres to Dublin - now an attractive base, becoming the only EU country with English as a first language. Goldman Sachs is eyeing Frankfurt and JPMorgan weighing up both cities. Lloyds Banking Group is branching out to Berlin, HSBC to Paris, and Morgan Stanley and Citigroup are considering a mix of EU locations.7
Deutsche Bank is going against the flow with its announcement to move jobs to London.8
The UK has acted as gateway for mobilization of IT resources across Europe. This has made London a preferred destination for global IT companies' European/EMEA headquarters. The ability to manage operations across Europe from London will be hampered by the additional cost and bureaucracy of travel and working permits. While moving operational bases from the UK harms the British economy, companies such as Amazon have shown confidence in Britain, announcing the opening of a UK region for AWS.5
Potential restrictions to EU citizen’s freedom to work in the UK add to the challenge of recruiting IT talent6, especially when demand already outstrips supply.
Brexit’s effect on the UK and nations with which it trades is uncertain. We advise companies leverage a near-real-time view of costs for services they receive in order to be ever-prepared for economic change.
1. By GDP; Brexit fallout will damage ICT sector across Europe, David Pringle, Science Business
2. Against the US$; £1 = $1.49 on 23.06.16 and $1.24 on 29.03.17
3. BREXIT: Impact on UK Businesses from an IT Outsourcing Perspective, Mit Patel, Netstar.
4. UK Outsourcing Industry Says Britain Should Remain Part of the EU, Jeremy Coward, NOA
5. Got the Brexit fear? Keep calm and keep using AWS - Amazon UK boss, Gavin Clarke, The Register.
6. What does Brexit mean for UK's technology sector? Cara McGoogan, The Telelgraph.
7. Brexit: What the biggest banks are planning once Theresa May begins EU departure, Gavin Finch, The Independent.
8. Deutsche Bank signs up new London HQ in show of faith in Brexit Britain, Anjuli Davies, Reuters.