The UK technology industry has seen record growth in recent years, with Tech Nation reporting that investments in the UK sector had risen to £10.1bn in 2019, a third of the investment raised across the industry in Europe in that period.
Both UK and multinational technology companies, many of whom have seen the UK as the gateway to Europe, are therefore following negotiations for a potential trade deal between the UK and EU closely, and preparing for what the end of the transition period may bring. If no trade deal is reached, trade in goods and services between the UK and EU will be subject to WTO rules, with the potential for increased trade barriers, tariffs and other restrictions. UK businesses providing certain digital services to EU customers may also need to register in the countries where their customers are based or under the "Non-Union MOSS" scheme. Visa requirements under changes to freedom of movement rules will have a significant impact on the industry's talent pool.
The prospect of divergent regulation will also impact on the technology industry heavily, bringing with it an increased compliance burden. In fact, in the initial period after the end of the transition period, many regulatory aspects will not change as the UK will retain all existing EU laws, and will ensure, for example, that existing IP rights are preserved in the UK. However, over time, regulatory divergence can be expected and this may actually happen relatively quickly for the tech industry, as the EU continues to roll out its Digital Single Market project. The UK has, for example, already said that it will not implement the Digital Single Market Copyright Directive and will no doubt take a similar position in relation to regulatory alignment with other DSM initiatives, such as the new ePrivacy Regulation and proposed EU Digital Services Act. Given that a large number of technology services agreements put the onus on tech suppliers to ensure that the solution or services provided comply with applicable law, this could end up being an expensive problem and therefore should be addressed in any new agreements that are entered into now.
In relation to data protection, the UK has already legislated to maintain the General Data Protection Regulation (GDPR) in UK law, but this is another area where the UK may ultimately choose to take its own path. For tech businesses operating across Europe, this is a key issue to watch, as the continued flow of data between the EU and the UK depends upon the EU accepting that the UK maintains an adequate level of protection for personal data. SaaS businesses, in particular, where customers and data may be located in multiple jurisdictions, will be keeping an eager eye on developments on this front especially as a large number of data processing agreements in place prohibit any changes to how data is processed without the express prior written consent of the controller.
Tech businesses will also need to monitor developments in relation to competition law and other areas of regulatory oversight and, more broadly, continue to audit the impact of Brexit on their commercial arrangements.