Opportunities and challenges for digital society and economy post-Brexit

November 16, 2016

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By William Perrin

Will is currently undertaking a short piece of research and analysis for the Trust looking what Brexit might mean for digital in the UK and the risks and opportunities associated with this.

What are the opportunities and risks for the UK digital sphere as we transit to Brexit?  Can the UK act more nimbly than the EU27 in evolving its rules better to suit the fast moving digital space as we fork from the EU legislative body?  In transition what non-regulatory opportunities might arise?   What could we do better in the digital sphere if we can move quicker and steal competitive advantage?  How could Britain become a better (digital) society if we can move independently and swiftly outside the EU system?  What opportunities and challenges will arise  in amendments to legislation in the short term as it is read into UK law?  What lessons can be learned from elsewhere?

Some headline observations and questions follow as they seem to me at the outset of my work with the Trust, some sections are of course more worked up than others.  What follows are my views, not Carnegie’s. Over the coming weeks I will be seeking views and evidence from a wide range of interested parties on the issues set out below – and others.

Data

After some initial caution, the Secretary of State for Culture Media and Sport has signalled that the UK will adopt the GDPR in 2018 in her 24 October appearance before the Select Committee.

‘Karen Bradley: Yes, absolutely. I had a meeting in the Department for Exiting the European Union on Thursday with the Secretary of State. We went through a number of matters. An example might be the General Data Protection Regulation, which of course comes into effect in the spring of 2018. We will be members of the EU in 2018 and therefore it would be expected and quite normal for us to opt into the GDPR and then look later at how best we might be able to help British business with data protection while maintaining high levels of protection for members of the public.’

Karen Bradley’s statement appears worded so as not to be conclusive on a post Brexit regime – she is providing certainty for businesses to plan for a major change in 18 months.  The ICO has written about the GDPR and Brexit and how to prepare.

Given the room for manoeuvre in the Secretary of State’s words, it isn’t clear if a debate is going on about whether the UK should we simply adopt the GDPR as is or is there a different form of data protection such as Privacy Shield that would eventually allow British data services to trade in the EU (i.e. is reciprocal)?  Is there a better response to Podesta’s challenge for trading blocs to engage with the USA on data and tech issues? What could be done to improve citizens’ data rights AND make UK industry more competitive through smarter regulation?  Given the uncertainty a new regime would cause, how great an advantage would such a regime have to deliver to make it worthwhile?

Society

Is a renewed focus on digital skills the great opportunity to close the digital divide in the UK? (Declaration – I am a trustee of Tinder Foundation)

Does greater independence for UK regulation give more scope for balancing the rights of free speech with protection of citizens from harm caused by offensive speech?

Regulation

EU telecommunications law was heavily influenced by the UK in the 1990s when it was formed, then adopted in the UK.  Can any additions or subtractions be made to this to allow markets to function better in the UK for the consumer and investor?  The Chief Executive of OFCOM has written a general article on telecoms and broadcasting.

Is the government taking part in ‘regime shopping’ in general practical or desirable?

Would the UK be better placed to retain the regulatory certainty of the existing regimes that work well at a time of increased business uncertainty?

How big would regulatory benefits be to make it worth changing a regime?

Connectivity

Does Brexit provide opportunities for improving poor rural broadband and mobile coverage with more bespoke, nimble interventions than the State Aid rules allow?  Are there similar opportunities for more direct fibre to the premises and future networks in a Brexit environment with simpler State Aid-type rules in a WTO setting?

Intellectual Property

IP is a complex area where UK law and protections are often closely intertwined with the EU.  Copyright for instance is broadly speaking, covered by high level international treaties, implemented in EU directives and then implemented in the UK.  The government has published a blog post that seeks to address concerns.  A comprehensive article by law firm Eversheds says:

‘The UK Intellectual Property Office (UKIPO) is listening to the concerns of IP owners, IP practitioners and industry bodies and it is considering the arrangements which could be put in place as either part of a bilateral agreement during the Brexit negotiations or unilaterally by the UK Government.’

‘Although these arrangements are not yet known, there a number of possible models which could be adopted and it is unlikely that the UK will allow a situation to arise where EUTM rights owners lose protection in the UK without there being a mechanism to safeguard their rights in the UK.’

‘Copyright is likely to be the least affected area of intellectual property law because it is a territorial right and there is no registration regime in the UK or throughout the EU. Many copyright principles are enshrined in treaties that go far beyond the EU. Where EU directives have been implemented, the principles have been adopted through UK legislation which we would expect to remain unchanged (unless repealed or amended by Parliament).’

The Chartered Institute of Patent Attorneys says in an article of August:

‘UK patent and trade mark attorneys continue to have all the rights they have at the moment to work before the UK and European IP Offices. CIPA will work with the UK Government and other interested parties to ensure that as many of these rights as possible are retained after exit from the EU.

‘The UK is a great venue for business and for obtaining, enforcing and exploiting IP rights in Europe. CIPA is committed to ensuring that this will continue.’

Radio spectrum

The UK Spectrum Policy Forum has produced a helpful report to DCMS on the implications of Brexit for spectrum.

Infrastructure

What critical infrastructure for UK digital products and services is physically in the EU27?  What cloud services and advanced internet services for instance would we need to have in the UK to enable our tech companies to develop and deliver services here when outside the EU.  For instance, if I am used to running or developing my software in the cloud which happens to be in Germany or just running a small business website how does that work post Brexit?  Is there an opportunity to develop such services in the UK?  The UK Council of Data Centre Operators and Tech UK have produced a report on opportunities and risks of Brexit with a graphic at the top of this blog post.

Procurement

Brexit gives an opportunity to test whether the UK’s procurement rules are in fact the product of the EU system or a broken domestic approach to procurement. What does this mean for digital companies and people who might benefit from services so procured in local and central government?

(Digital) Single Market

The terms on which UK businesses will have ‘access to’ the single market are critical, but will take several years to resolve and we don’t know yet what the Government’s negotiating ‘hand’ is.  The Commission has published a broad package of proposals for a digital single market (including recently on telecoms) but it isn’t clear yet when this will come into force, nor if the EU system can reach agreements on all its aspects. Is the digital single market more incremental and repackaging than revolutionary?

High tech clusters outside the EU and NAFTA trading blocs

In general, what can be learned from approaches of other high tech clusters in societies where government plays a role that are outside our major trading blocs? Tel Aviv, Singapore, Taiwan etc

Factors of production

Impact on ‘factors of production’ is a useful strategic lens for economy-scale change.  Land, labour and capital are traditionally regarded by micro economists as the primary ‘factors of production’ that underpin production of goods and services. ‘ Entrepreneurship’, as a broad willingness in society to transform these factors into products is often added in as a fourth factor.  For the digital sphere we can almost substitute ‘intellectual property’ for land.

Labour

The government has indicated that it plans to restrain the movement of labour. For the tech sector this risks reducing the supply of labour.  So at a strategic level the primary focus for government and industry should be on post Brexit labour supply both to increase the domestic supply of labour and impact mitigation for specialist labour flows from overseas.  We can already see signs of this in policy announcements by DCMS Secretary of State, Minister for Skills and the Minister of State responsible for digital policy.   Digital industry, in a Tech City survey of 1,200 people in July reports labour issues as their highest priority.   The Prime Minister has reported on her trip to India and seems to signal that one fast track business executive visa service ‘The Great Club‘ will be expanded as well as possible changes to the wider India/UK visa system if returns are improved. The uncertainty during the transition to Brexit could impact entrepreneurship, that could be offset by government stimulus and incentives.

This should be the biggest chance for a generation for the tech sector to improve the government’s migration schemes.  Can the UK tech industry channel its energy into designing a better, quicker visa system for people with necessary skills?  Will the Home Office come to the table for a user-led design process?  What can be learned from other countries’ high-skill visa programme? How can the UK have the world’s best high level digital skills migration scheme?  How can the tech sector fight to ensure that, within any future quota systems its needs are met?  Better visas, not necessarily more in total.  The government has signalled with the ‘Nissan deal’ that it is open to special pleading – is labour the area tech should seek its deal with the government?

Capital

Wider Brexit issues will affect capital and IP flows, but the government does not set out explicitly to constrain those.  Indeed the government broadly plans to encourage greater mobility in the latter two through the medium of ‘free trade’.  It isn’t yet evidenced how the government’s plans for Brexit will affect net capital flows/funding availability in the medium term, despite much speculation.

Will Brexit, once disruptive effects have worked through diminish or increase the funding available to the UK tech sector?   What policies would have to be in place to ensure an increase?  What risk premium might be required to invest in Britain, how can this be offset by the government, for instance through the tax system? Wendy Tan Wright of Entrepreneur First says (Observer 16 October):

Brexit may stall international funding. Last year saw a record high for investment in UK startups of $3.6bn. European funding to the UK would be at risk if we are not part of the EU. Investment activity backed by the European Investment Fund represented 41% of total investments in Europe in 2014. The EIF has anchored several of the largest UK tech venture capital funds, who have reported that the EIF are cautious to commit until there is a clearer roadmap for Brexit

I should be interested in countervailing arguments to this general view.  I shall be looking in detail behind the media reports at various government reassurances on sustaining EU funding to industry.