Brexit two months on: how has the vote affected the UK IT industry?

Have the sector's worst fears been realised?

Before the referendum vote on 23 June, we talked to several people working in the UK IT industry about whether they believed leaving the EU would be a good idea. On the whole, most of our interviewees seemed to want to stay.

So, two months on, what impact has the vote for Brexit had on the IT sector? Has an economic wobble and the prospect of restricted freedom of movement begun changing budgets and personnel strategy already?

Bouncing back

James Poyser, founder of accounting software firm inniAccounts, said prospects for his business and the wider IT sector did not look encouraging directly after the vote but that since then the outlook has got brighter.

"As our business provides services to contractors we monitor things very closely. Contractors are a very big barometer for impending recession," he said.

"Within a week [of the vote], we had seen an 11 per cent drop in the number of people becoming self-employed contractors, which indicated people were sticking with the job they had rather than taking advantage of the lifestyle perks contracting affords them. The trajectory didn't relent and was still moving downwards in mid July."

It was a decline the like of which inniAccounts hadn't seen since 2008 when the financial crisis hit.

"However, this month we saw it bounce right back to pre-2008 levels," Poyser said.

"This means that the fear that big business would stop or put on hold IT projects isn't coming to fruition and contractors are providing a flexible way to complete strategic change, and also use their expertise to start to plan for the likely outcomes of the [Brexit] negotiations."

Poyser said he's now "feeling positive" about his own business. While senior hiring has been put on hold for now, he said the firm is continuing to hire 'front-line staff'.

James Smith, managing director at Networkers Technology Recruitment, had a similar story to tell, saying his firm saw a "momentary pause in recruitment" among some of its clients, but a fast return to business as usual for "the niche IT skills they require".

"Companies that were quiet before Brexit are still quiet now, and those that were on a recruitment drive pre-Brexit are continuing to expand their workforce. What remains to be seen is whether those IT projects in the pipeline will go ahead," he said.

"From a candidate point of view, there has been no change in the amount of work available but there have been a minority of permanent candidates who have been hesitant to leave their current posts while they wait to see the impact of Brexit on jobs at the end of the year."

Brexit two months on: how has the vote affected the UK IT industry?

Have the sector's worst fears been realised?

Smith also sees an ongoing uncertainty among US firms who are weighing up whether to expand into the UK or pick a country within the EU.

Freedom of movement?

Simon Crosby, CTO and co-founder at endpoint security firm Bromium, meanwhile, predicts many Brits with good IT skills will now be very tempted to leave the UK.

"The incredible technical talent in the UK just became a lot cheaper for foreign countries to hire. Sadly they will suffer as their standard of living drops, and their opportunity to live and work in other countries in Europe is restricted," he said.

"Ultimately, I expect many of them to leave the UK permanently for countries that will pay what they are worth, such as the US."

Crosby has another concern: with over a third of research funding for universities currently coming from the EU, he sees "a huge impact on universities' ability to deliver highly skilled tech workers to the UK economy".

Bhuwan Kaushik, CEO at IT deployment firm Spectromax, believes the IT skills gap was "growing long before the term ‘Brexit' existed" but fears the referendum outcome may well make matters worse.

"However, it could be widened further still if skilled workers leave the UK for opportunities elsewhere in Europe, and stricter border controls are put into place, putting an end to free movement for EU workers."

However, Inder Singh, chief strategy officer at the UK arm of IT services firm Unisys, sees the potential effect on movement of people as "a time of incredible opportunity" for IT.

"The sector remains a driver of economic prosperity, innovation, and an enabler of social change - all pointing toward a healthy future for the industry," Singh said.

"Potentially we'll see new borders being created across the European Union over the coming years, which is likely to affect immigration and freedom of movement. This will impact border management, passports and visa operations and offer up the opportunity for governments to review their border controls, with the potential to look at innovative, technology-led solutions such as biometrics and the cloud.

"In addition, Brexit also means that the management of data is likely to be impacted as the UK moves out of the EU and new laws are put in place for compliance with nations working to satisfy the incoming GDPR. This could see some roles shifting across the region, but from a technology standpoint I believe it will offer many opportunities as UK business moves to comply with new legislation."

Brexit two months on: how has the vote affected the UK IT industry?

Have the sector's worst fears been realised?

Death to distribution?

Distribution deals are also an area of some concern. Michael Hack, SVP of EMEA operations, at network monitoring firm Ipswitch, sees channel partners, resellers, MSOs and distributors struggling against "a backdrop of potential sterling fluctuations and market uncertainty".

"Could Brexit, for example, also raise questions and concerns about how future contracts are negotiated and available margins?" he asked. Like Singh, Hack also worries about whether new UK laws may override GDPR, which also won't help matters when companies are choosing business partners.

Morten Brøgger, CEO of Huddle, predicted that consulting firms that work with the UK government will have their work cut out.

"To say they'll be busy is a massive understatement. For perspective, it took nearly seven years to finalise the recently inked EU-Canada deal. To simply maintain the same number of trade deals, the UK will have to negotiate trade deals with 53 countries and a large number of stakeholders. That's a lot of man-hours," he said.

Boyan Ivanov, CEO of software-defined storage firm StorPool, wondered whether falls in the value of sterling would benefit domestic suppliers.

"In the first instance this sounds positive for UK companies. But in a world where the only way to progress is to be open and do business globally, I think this would be a losing bet, both for the UK and for European companies that would like to do business in the UK," he said.

But Nicky Stewart, commercial director of UKCloud, believes all these concerns will fade as the UK economy is "very healthy indeed".

"Matt Hancock, Minister of State for Digital and Culture, recently said that the UK's digital exports are now worth over £30bn per year - and that the digital sector is growing twice as fast as the UK economy, whilst the House Of Commons Business, Innovations and Skills Committee recently published a report on the UK's digital economy which stated that the UK has the highest proportion of GDP attributable to digital, of all European nations," said Stewart.

"Digital is global, and the UK's digital economy will undoubtedly rise above Brexit, even if the industry emphatically did not want it."

Kaushink at Spectromax is less sanguine, predicting Brexit will "prove to be bad news for the UK IT Industry, but more as an agitator than an instigator, exacerbating existing issues in tech rather than creating brand new ones".

"I think a lot of potential problems will be long term and difficult to quantify, as there are so many external factors in play. We may never fully understand the impact of the Brexit on the IT industry, let alone in the first few months," he said.

"Leaving the EU at a time when the UK has such a pressing need for skilled IT professionals is certainly unfortunate. I'm not convinced businesses will have felt the effects thus far but you can bet that any IT project starting in 2017 will have a smaller talent pool from which to choose from, which may shrink even further in the years to come."

So buckle up - we've still got one hell of a ride ahead of us.