The UK's digital industries are at risk after Brexit if access to markets, talent and the free flow of data across borders are not secured in government negotiations, a leading trade body has warned.
The digital industries accounts for 16 per cent of domestic output, produces nearly a quarter of all exports and generates 10 per cent of employment with almost three million jobs, a new report from TechUK and Frontier Economics calculates.
“There is no sector more dynamic, more innovative, more resilient than tech, but that doesn’t make it immune to Brexit. As this report makes clear, there are real risks that need to be understood and addressed. The UK’s thriving tech sector can come through this process and go on to power the vision of global Britain," said TechUK president and managing director of Sage for UK and Ireland.
"The UK’s digitally intensive businesses are big exporters to Europe and the rest of the world. They represent the best of what global Britain can be: open, fast-moving innovative and internationally successful. It is essential that their importance and needs are recognised.”
Digital businesses across the UK - from hardware and software companies to media and telecoms, as well as sectors such as financial services and insurance which contribute to the digital economy - would need a bespoke arrangement with the EU to be secured in the Prime Minister's negotiations to ensure their contribution to the economy continues.
And a free-trade agreement guaranteeing market access would also need to have "specific commitments on the movement of labour in relation to services and investment, where the commitments could be tailored to meet the requirements and sensitivities of specific sectors" which could be separate from immigration policy, which Theresa May has already promised to limit in her Brexit plans.
One in five of the digital sector's 3m workforce are from outside of the UK, it estimates, and a third of those are from countries in the EU, while foreign born workers accounted for 45 per cent of all employment growth between 2009 and 2015.
Provisions on "mutual recognition regarding data protection" would also be needed.
However, such an agreement goes far beyond any previously agreed by the EU, the report notes.
"For a future agreement to contain the elements discussed above, the EU and the UK would need to negotiate a trade agreement of a scope and depth that surpasses any agreement in place between the EU and non-EEA members at present," it said.
“The key message of this report is that the government needs to be realistic about the impact of Brexit on the UK’s digital sectors," said Julian David, chief executive of the group which represents more than 900 businesses.
"It is manageable but it needs to be managed. A disorderly Brexit would be highly disruptive. These businesses are highly dependent upon the single market – they need regulatory continuity and negotiated access in key areas. A bespoke free trade agreement is the best vehicle for that. But there will need to be a comprehensive transitional deal. A full free-trade agreement will take several years to implement.”
The group is calling on the government to reassure the sector that it understands the significance of digital business to the UK economy and to provide plans for how it would support the tech industry if the UK pursued a "walk away" option. May last week said that no deal was better than a bad deal for Britain.