Brexit: An Assessment of the Impact on the IT Industry

 

What's the biggest, most uncertain issue facing the UK at the moment? It has to be Brexit. The March 2019 deadline is looming and there's still no clear cut vision of what the UK will look like without the EU, especially at a macro level. 

Despite recent activity, we are none the wiser as to what the real impact will be to the UK at a macro level. That’s not to say we haven’t all noticed some change and in the particular sector that PTS operates in, there’s been lots of it.

The IT sector’s influence touches most UK businesses regardless of size

For that reason, any change will have some concomitant impact. For example, the cost of IT kit has already risen with the likes of Dell and HP applying double-digit percentage increases, with Microsoft advising increases of 22% from the beginning of 2017 - a consequence of a weak Sterling.

Price increases and currency arrangements are changing procurement behaviour. For many, our clients who are mid-project, there was a rush to place orders before committed exchange rates expire and in other cases IT budgets are being aggressively reviewed. Some of the projects are not seeing the light of day, with particular consternation in the Higher Education sector where uncertainty around research funding is a game-changer, as is the future employment status of many EU citizens that ply their trade in UK Universities.

We have of course seen this type of decision making inertia before, not least after 9/11 and during the Global Financial Crisis, so perhaps its not surprising that major investments are being postponed or cancelled, but of course the consequence of a dip in investment is an economic slowdown or indeed a downturn.

Looking further ahead

Things look a little brighter for the sector in the long term. It’s likely that Brexit will have a consequence for the available pool of skilled IT workers in the UK and analyst are speculating that this could lead to a drive to better harness IT and drive greater efficiencies in existing processes. A recent McKinsey study concludes that 45% of work activities could be automated using already demonstrated technology. Even if this forecast is over-stated, the IT industry can look forward to a golden era of implementing the platforms, robots, smart technology, internet of things, algorithms and ‘AI agents’ that are needed to effect this change.

On the subject of AI and agents

Amelia- which is described by its developers as IP Soft as ‘your first digital employee’ due to its natural language interface - is starting to be deployed into UK customer service roles, with the London Borough of Enfield announcing in the summer they would be implementing (employing?) Amelia.

Smart Technology such as blockchain is another potentially disruptive development. Barclays announced earlier in the year they had demonstrated that a blockchain can cut the settlement time on securities contracts from 90 hours to 3 minutes. This significant technological advance raises the potential of the UK FinTech industry which is well placed to flourish outside of EU legislation, but in the meantime, the industry will rely upon skills from overseas engineers and scientists that are needed to help with its development.

The situation is complex and certainly not clear cut.

Talking to our clients what does remain clear is that despite the uncertainty they will continue to use IT as a differentiator, to make life easier for themselves and their customers for competitive advantage. There is also the possibility that this disruption could have a positive impact on the industry as the old proverb suggests ‘necessity is the mother of invention’.

 
Brexit.jpg
The IT Sector’s influence touches most UK businesses regardless of size and for that reason, any change will have some concomitant impact.
— Gareth Johns | CTO

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