Brexit: Implications for the Technology & Communications Industries

By Ben Hughes

01-2020

The UK left the EU on 31st January 2020. By virtue of the transition period in the Withdrawal Agreement, EU law continues to apply in and in relation to the UK only until 31st December 2020. After the end of the transition period the EU Treaties, EU free movement rights and the general principles of EU law (such as the single market and the customs union) will cease to apply in the UK. Prior EU regulations will continue to apply in UK law until they are modified or revoked by UK regulations.

This note anticipates how the change in the legal landscape that will occur after the end of the transition period may impact on the technology and communications industries.

This article is part of our Brexit series and technology and communications businesses will be affected by all of the implications identified throughout this series and, in particular, our note on the Telecommunications Regulation in the UK implications of Brexit.

How could increased trade barriers and restrictions on freedom of movement impact the technology & communications industries?

The costs of providing technology services would be increased by custom tariffs applicable to trade between the UK and the EU or Visa requirements on staff from the EU coming to the UK to work on technology projects (or vice versa), if such tariffs or Visa requirements are introduced after the end of the transition period. This would inevitably impact the pricing of such services, as well as potentially the time required to deliver services or projects. At this stage, there remains uncertainty around what custom tariffs or Visa requirements will apply after the end of the transition period. That said, the UK Government has announced a new bill to repeal the current EU-derived free movement provisions immediately after the end of the transition period. For further information see our notes on the commercial contract implications of Brexit and on the employment and immigration law implications

Technology and communications businesses see the European Digital Single Market as a significant opportunity for the UK. The drive behind the single digital market was to promote common data protection laws, provide better access to products and services at reduced costs across the market, and generally increase adoption and acceptance of digital services. However, the end of the transition period may mean that UK companies are excluded from participating in the European Digital Single Market (or aspects of it), meaning that UK consumers and technology companies may not enjoy all the benefits of this EU project. For further information see our note on the English Intellectual Property law implications of Brexit.

From a regulatory perspective, EU laws have largely been incorporated into UK law and so would not quickly fall away, but there could be a gradual repeal of Regulations seen to be burdensome. For example:

  • there may be some relaxation of competition law rules to allow the inclusion of more territorial restrictions than are currently permitted by the EU competition rules; and

  • the Withdrawal Agreement requires the UK to continue applying the EU's General Data Protection Regulation (EU GDPR) to some EU-originating data, after the end of the transition period; and in any event, most technology businesses have people or customers in the EU, so will likely still have to comply with the EU GDPR. At the end of the transition period, the UK will no longer be treated as an EU Member State: in addition to requiring updates to the wording of contracts and privacy notices, and the appointment of a GDPR "Representative" in the EU, the UK, or both, it also seems likely that data transfer agreements will need to be put in place between UK and EU-based companies (even intragroup). Finally, multinationals that were using the UK as their EU GDPR regulatory "one stop shop", will likely look to move certain data-related operations or decision-making authority to other EU countries, in order to retain the benefit of that "one stop shop" system. For further information see our note on the Data Protection and Cybersecurity implications of Brexit.
Implications for overseas technology & communications businesses

Overseas technology and communications businesses often establish operations in the UK as a stepping stone to trading with other EU countries. The uncertainty over various key issues that arise from Brexit has already been a factor in the relocation of the headquarters of non-EU technology and communications businesses from the UK to other EU Member States and it may continue to affect the choice by businesses to establish operations in the UK.

Any further falls in the value of Sterling would be good news for overseas businesses importing from the UK, but not for overseas businesses exporting to the UK. For overseas businesses considering an investment in the UK, the fall in the value of Sterling since the 2016 referendum has offered significant opportunities to acquire UK firms cheaply which may account for the recent marked increase in M&A that we have seen.

For further information see our note on the English corporate law and transaction implications of a Brexit.

Absence from discussions on EU policies and projects
The EU funds and runs a wide variety of projects looking at science, technology, engineering and mathematics (STEM) with 74.8 billion euros budgeted from 2014 to 2020. Between 2007 and 2013, the UK paid 5.4 billion euros into the EU research budget but got 8.8 billion euros back in grants that fund public research by British labs. However, it is not just funding that concerns researchers. The UK participates in EU projects and initiatives that enable cross-border collaboration and if this stops the UK will have less opportunity to influence future policy direction (and eventual regulation) and the EU projects would have to proceed without the valuable contribution and insight of UK companies (who are often early adopters of new technology). There is the possibility of the UK agreeing an association agreement in respect of such research but, if this could be agreed, it would involve contributing more funds to the EU research fund and might involve accepting free movement of people (as the EU is currently insisting as a condition for agreeing a research association agreement with Switzerland).

This article is part of our Brexit series