The Impact of Brexit on IT Outsourcing: Projections vs Reality – Part 1

The sun rising over the wake of Brexit illuminated a nation full of contrasting emotions and anxiety brought on by the uncertainty of the future. Those who wanted Britain to be accessible only to Britons were triumphant, but the many who saw what Brexit might do to the technology industry were crestfallen, to say the least.

The media lit up with predictions about the negative effect Brexit could have on the outsourcing industry and an underlying state of restrained panic could be sensed amidst the educated forecasts of industry experts.

But now that we are almost a year on from the referendum result, and we have the benefit of hindsight, how many of these predictions were on the money? In order to better answer that, let us first take a look at some of the primary concerns following Brexit.

London Parliament in the storm


Projected Impact of Brexit on the IT Outsourcing Industry

1. Loss of Talent
Closed borders prohibiting the free movement of skilled workers was a huge concern following Brexit. With an already thin talent pool relative to the demands of the industry, many experts thought that cutting off the supply of European professionals would severely impact the industry.

Predictions about the severity of this impact differed. Though, many experts shared the view that cutting off the talent pool would see many UK businesses looking to the EU for IT outsourcing options and disregarding the UK completely. Even worse, experts feared that US companies would follow suit and begin looking to continental Europe for IT solutions as opposed to the UK, formerly the hub of tech development in the EU.

2. Demise of Fledgling Companies Due to Impact on Sterling
While many experts credited the leaders of established companies with the savvy necessary to forge ahead despite the challenges imposed by Brexit, they feared for the start-ups. This was largely based on the prediction that the pound would suffer as a result of the UK leaving the EU – which turned out to be correct.

The thought behind the prediction was that the lower value of the pound would hike interest rates and make finding funding that much harder.

3. Uncertainty Regarding Data Protection
With aspects of the outsourcing industry requiring the transfer of personal data into and out of the UK, there was initial concern that Brexit would require a reworked General Data Protection Regulation, or GDPR. If restricted, the UK would have to achieve an adequacy decision from the European Commission and set certain safeguards in place for the transfer of data.

This is achievable, but there was the overarching concern that the added hurdle might see companies shy away from international operations.

electronic hardware board


Was There Any Truth in These Projections?

Because of the mandatory terms of exit, the UK won’t leave the EU for another 2 years. So, until then, business operations will continue as usual. This means we haven’t yet had a chance to see if these predictions will actually be realised when the real Brexit happens.

However, we have had a chance to examine them now that the initial cloud of panic has dissipated, and they don’t spell the impending doom that some might have suggested post-referendum.

Join us for Part 2 of this look at outsourcing under Brexit in which we’ll discuss the positives in store for the IT outsourcing industry.

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