Almost half of the UK’s digital exports go to the European Union, recently published UK government figures have revealed, amid growing concerns in the tech industry ahead of the country’s scheduled departure from the EU at the end of 31 October.
The data released last week covers UK trade across sectors under the remit of the government’s Department for Digital, Culture, Media and Sport (DCMS). It shows that exports to the EU for services in the field amounted to £23.1 billion in 2017, representing 42.8% of the total services exported. Of DCMS sectors, the largest individual exporting to the EU was the Digital Sector, representing £19.4bn worth of trade.
In terms of goods, the UK exported £11.3 billion of DCMS Sector goods to the other EU member states, 40.1% of total DCMS Sector goods exported by the UK, with goods from the digital sector, once again, having the largest share of this figure.
The UK government analysis further highlights that the European Union is a ‘key partner’ for trade across the sectors examined and that of specific EU countries, France, Germany, Ireland, the Netherlands, are particularly noteworthy trading partners.
Meanwhile, the figures for the UK’s imports from the EU are just as daunting.
The UK’s DCMS Sector imported £13.5bn (44.5% of total services imported by the DCMS Sector) of services from EU member states in 2017. In terms of DCMS goods, the UK imported £21.1bn from other EU members in 2017, 44.9% of UK goods imports in the field.
The data has sent shivers through many in the tech industry, concerned that the impending threat of the UK crashing out of the EU could have a severe impact on business in the field.
Dom Hallas, Executive Director of the UK tech lobby group, Coadec, highlighted the fact that the digital economies of the UK and the EU are closely linked and that trade in this area cannot be discounted.
“These figures are yet another reminder that the digital economies of the UK and EU are deeply interwoven – and the rules that govern them can’t be torn apart post-Brexit,” Hallas told EURACTIV.
Moreover, Thomas Boué, director-general of European Policy at BSA. The Software Alliance, a leading advocacy group representing the likes of Microsoft, Apple, and IBM, attempted to strike an optimistic tone for the future of tech relations post-Brexit.
“This report shows the importance of the UK-EU trade relationship, especially in the digital sector. In a post-Brexit world, BSA and our member companies want to ensure that digital trade and data flows between the UK and the EU are not unduly affected,” Boué told EURACTIV in emailed comments.
On the subject of post-Brexit data flows, UK government papers recently leaked to the press detailed various concerns highlighted as part of Operation Yellowhammer – the UK’s contingency planning for a no-deal Brexit.
With regards to the technology industry, the papers shine a concerning light on disruptions to businesses reliant on transferring data between the EU and the UK.
According to The Sunday Times, the leaked papers reveal that the scenario of a no-deal Brexit may “disrupt the flow of personal data from the EU, where an alternative legal basis for transfer is not in place.” The papers continue to say that “in no-deal, an adequacy assessment could take years.”
Earlier this year, the UK’s data chief, Information Commissioner Elizabeth Denham, confirmed that additional EU law may be required in order to facilitate data transfers from the bloc to the UK.
In response to the concerns, BSA’s Boué informed EURACTIV that for industries that rely on software services, it is imperative to have the continuation of a “robust legal framework to ensure data flows between the EU and the UK can continue seamlessly.”
What is more likely, however, is that an adequacy agreement, as outlined in the leaked Operation Yellowhammer papers, akin to the data transfer agreement the EU has with the US, the EU-US Privacy Shield, would have to be agreed, and with haste.
Meanwhile, the UK’s Digital Secretary, Nicky Morgan, has been attempting to divert attention away from the risks to the UK’s tech sector for a no-deal Brexit.
Writing in The Telegraph on Wednesday (21 August), Morgan highlighted the importance of increasing trade in the tech industry with wider global partners, such as Asia and the Americas.
“As we leave the EU and expand our trading relations around the globe, the growing interest from two of the world’s biggest and most important technology markets is one more reason we should be optimistic about our future,” Morgan wrote.
She added that figures published on Wednesday showing that between January and July 2019 the UK technology sector attracted $6.7 billion of investment, with more than half of these investments from America and Asia, is indicative of the UK’s draw in the field.
On this subject, Coadec’s Dom Hallas said the numbers cement the UK’s role as the “top ecosystem in Europe…[and]…show that neither side benefits from a disorderly Brexit – but British tech startups will suffer more.”
The UK is currently set to formally withdraw from the EU at midnight on October 31.
Under the new Prime Minister Boris Johnson, the UK government has hardened its stance and the previous deal agreed between former Prime Minister Theresa May and the EU has been sidelined, meaning that the commitment of the previous UK government to enable data flows between the EU and the UK is no longer certain.
For his part, Johnson touches down in Berlin today, where he is due to meet Chancellor Angela Merkel in a bid to ignite the possibility of renegotiating a revised Brexit deal.