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February 1, 2019

A third of companies may relocate due to Brexit: What about the tech industry?

By Ellen Daniel

New findings from the Institute of Directors show that nearly one in three members of the organisation could be forced to move operations out of the UK due to Brexit.

This is according to a survey of over 1,200 company directors conducted by the business organisation, which found that 16% had already begun relocation plans or were planning to do so in the near future, while a further 13% were actively considering relocation.

There has been a lot of coverage of international companies choosing to move their operations elsewhere, with the likes of Dyson and Airbus hitting the headlines. However, smaller companies could be hardest hit, with small companies almost twice as likely to be actively considering moving as a result of Brexit.

Edwin Morgan, Interim Director General of the Institute of Directors, said:

“It brings no pleasure to reveal these worrying signs, but we can no more ignore the real consequences of delay and confusion than business leaders can ignore the hard choices that they face in protecting their companies. Change is a necessary and often positive part of doing business, but the unavoidable disruption and increased trade barriers that no-deal would bring are entirely unproductive.

Two-thirds of exporters to the EU were looking to relocate overseas, with the preferred location to move operations to was the EU, with 69% of respondents having this as their first choice.

How could this affect the UK tech industry?

Of all the sectors, “professional/scientific/technical” had the second highest percentage of organisations that had already relocated at 14%, with “financial and insurance” the only sector to have a higher proportion at 17%, having clear implications for the UK’s fintech sector.

Electronics and hardware manufacturers also look likely to take a hit, with the 34% of company directors selling goods only said they were considering relocating or have done so already. This figure is lower, at 27%, for those selling services only. In 2018 Panasonic announced that it was moving its European HQ from the UK to The Netherlands, and just last week it emerged that Sony was also moving its headquarters.

According to the New Statesman 3,500 tech jobs have moved from London to Brussels since the 2016 referendum, with more expected after the Brexit deadline. There is also a danger that investment in the UK’s once world-leading tech scene may be diverted elsewhere

Brexit “brain drain”, in which must-needed tech talent may choose to go elsewhere, is a major problem for the UK tech industry. According to the 2018 SRG Salary Survey, 40% of people working in STEM thought that they would have to work harder to retain their staff post-Brexit.

Understandably, many are worried, with Tech for UK recently collecting 800 signatures from UK tech industry CEOs calling for a second referendum. Last year’s Tech Nation Report revealed a similar pessimism, with two of the three biggest challenges facing companies industry revealed to be Brexit-related.

Morgan said:

“We still have a chance to stem the flow, and provide enough certainty to the firms that are considering moving but haven’t yet done so. The UK’s hard-won reputation as a stable, predictable environment for enterprise is being chipped away. Our political leaders must keep this in the front of their minds as we enter this critical phase of negotiations.”

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