The impact on IT & Digital in a ‘no deal’ Brexit scenario
If there is a ‘no deal’ Brexit, what are the implications when working with IT and Digital?
One of the first issues could be the effect on the workforce. If you or any of your team are EU nationals, the UK Government has committed to protecting rights, but EU nationals will need to register to do this.
It could be that the workforce is affected as people choose to leave the UK, and EU applications for UK technology jobs dwindle. The full impact will remain to be seen. World Trade Organisation (WTO) rules mean that the sales and purchase of software and hardware in general shouldn’t face major disruption. The 1996 WTO Information Technology Agreement removed tariffs on a wide range of technology products that includes hardware and software. This should mean that both cloud based and traditional software sold between the EU and UK should remain tariff free.
Technology services such as consultancy and the increasingly popular Software as a Service (Saas) model are classified as services as opposed to products. In theory, these should also remain tariff free, as they fall under the General Agreement on Trade in Services (GATS). Under this agreement, the international sale or services on WTO terms are also tariff free.
A more difficult area are services and systems that store and use personal data. The UK and the EU has stringent Data Protection laws, even more so post-GDPR. US companies need to sign up to the stricter Privacy Shield standard in order comply with the EU standards. If the Withdrawal Agreement isn’t signed and the UK exits the EU with no deal, then only US companies who have updated their Privacy Shield details to explicitly include the UK will in theory be compliant.
While many companies are likely to be taking this precaution, there is a risk that some do not. The EU Commission has decided that, even though the UK complies to the same strict Data Protections standards, it will be seen as a third country with regards to personal data. It has also stated that it will not fast track a process of recognition of the UK.
The UK position is that the flow of data from the UK to the EU would still be allowed initially, but this would remain under review.
There are many other potential pitfalls, for example the implications on commercial contracts. A ‘no deal’ Brexit will be unchartered waters, so please check with any suppliers and your data protection and legal advisers to clarify the implications.