The end of this month marks the one-year anniversary of the referendum when British public decided, by a narrow majority, to leave the European Union, the so called Brexit. The unexpected result has triggered a series of events that affect the future of Britain’s economy and its relationship with the rest of Europe.
The pro-Brexit campaign claimed that leaving the EU was necessary to stop unwanted immigration of EU nationals, reverse unfair EU regulations that hurt the economy, and stop paying billions of pounds to the Union in taxes. They also claimed that the United Kingdom would not lose access to the European single market.
The situation post referendum is quite different. While formal Brexit negotiations are about to begin -- after the British government, in March, triggered Article 50 of the European Treaty to leave the Union -- British people and businesses are already feeling the effects on the road to fully disconnect from the EU.
Most of the talk in the press has been about the financial industry, the status of London as the capital of European Fintech, and the role of the City (London’s financial district) in the post-Brexit era. Losing access to the single market and the EU “Bank Passport” --which allows financial services to be offered across the EU--, could be a disaster for many banks, fintech companies and investment firms.
The IT industry is also feeling the effects of the Brexit decision. Companies are unsure of the status of many high-skilled workers in their UK facilities, who could lose their right of residency. In fact, many EU workers are already preparing to leave, and recruiters are having a hard time sourcing talent outside the country. The drop in the British pound is also a deterrent to many, as their salaries are no longer so attractive to consider moving to Britain.
“This is creating significant recruitment challenges in sectors that have historically relied on non-UK labor to fill roles,” Gerwyn Davies, labor market adviser at CIPD, which represents human resources professionals, told The Guardian. “With skills and labor shortages set to continue, there’s a risk that many vacancies will be left unfilled which could act as a brake on output growth in the UK in the years ahead.”
Some companies are also prime for takeovers, as foreign investors step in lured by “sales” of previously unaffordable tech giants.
One example was last year’s acquisition of Arm Technologies by Japanese tech group Softbank. Prime Minister Theresa May welcomed the prospective deal as “in the national interest” and a vote of confidence in post-Brexit Britain, in spite of her warnings after the referendum that foreign takeovers would in future be subject to tougher scrutiny. The fall in the pound following the referendum has left the UK currency nearly 30 per cent lower against the Japanese yen, making Arm an attractive target.
Most of the software and fintech companies, who once considered London the best location for their business, are already relocating some operations to continental Europe and Ireland, with the intention of moving their corporate headquarters, to maintain access to the single market and the EU bank passport. One example is Transferwise, one of the biggest fintech firms in Europe, which announced that it will move to keep access to the single market.