The Committee was given a short tour of the Google facility in Shoreditch, which provides space for tech entrepreneurs to meet, use co-working or event space, meet mentors, and learn about how to access finance and commercialise ventures.
The Committee then held a roundtable discussion around the opportunities and risks from Brexit with a range of businesses, including multi-nationals and start-ups, organised with TechUK.
The Single Digital Market was a work in progress and progress had been slow. Tariff barriers were considered of a lower priority as tariffs on IT goods were already low. Concerns were raised about non-tariff barriers developing in the event of the UK leaving the single market, and consequent regulatory divergence. Trading on WTO terms would be considered less of an issue. Clearly a dominant strength of London was the eco-system that brought people from Fintech and Venture Capital networks together. A portion of the venture capital that fed into London’s tech economy had come via the European Investment Fund.
The main two concerns raised were access to talent and data flows.
There was an acceptance that free movement as it currently operates would end. The replacement system needed to be open to talent, but there was a fear this would be incompatible with an immigration system designed to meet a numerical target. One company recounted a four month experience of trying to secure a visa for employing non-EEA nationals. An estimated 25% of the tech workforce are EU nationals, and similarly an estimated 25% of the tech workforce in Europe are UK nationals. Deterring international talent would affect the attractiveness of the sector. Much of the growth in employment in the tech sector had been driven by non-UK born workers.
The tech/digital sector was expanding and it needed to be able to source talented people. The domestic skills pipeline needs to grow, but there is a time lag and tech talent pipeline needs to be maintained. This was not just the technical specialists, one large company pointed out they employed lots of EU nationals in whole range of roles within the operation.
Start-ups do not have HR departments. They are less able to manage complicated immigration processes. Other barriers, such as delays in shipping goods, are much more difficult for small operations to absorb.
This was described as a red line for the sector. Current data protection measures in the UK are considered ‘adequate’. The EU Commission have the power to decide if such systems are adequate once the UK leaves the EU. Business wanted confirmation of the Government’s approach in advance of leaving the EU to maintain business certainty.
An adequacy decision allows personal data to flow from the EU (and EEA countries) to a third country without further safeguards. This is important to enable the import and export of data. It is possible for third countries to receive an adequacy decision, and Israel was given as an example.
There would be implications if the UK did not have a data adequacy decision. There are risks that businesses in all sectors of the UK economy would not be able to rely upon international data flows between the UK and the EU. The UKs competitiveness would diminish and may affect the attractiveness of the UK as a destination for investment. While some large, international firms may be able to adapt—there are alternatives but they involve considerable burdens on business—but it is less likely to be unworkable to SMEs, and this would have repercussions in areas such as Fintech.
A free trade agreement between the UK and the EU should secure ability to move data across borders. The UK has strength in services and, generally, services are not covered well by FTAs. There is a risk that data protection authorities in Member States may not consider the economic aspects of the UK not getting a data adequacy agreement. There would also be a risk of a legal challenge from privacy advocates who do not like UK legislation on privacy. US and EU have different approaches to privacy, and managing this can create complexity.
Bilateral relationships outside the EU require more work in advance to ensure privacy regulators in both jurisdictions are content. The Digital Single Market aims to reduce the need for lots of bilateral negotiations. However, development of the DSM has been ponderous.
The Committee had a roundtable discussion with a range of public and private sector organisations and businesses involved in the creative industries, hosted by the Creative Industries Federation.
Many creative sectors in the UK seen as a success story. Film industry record level of exports and globally competitive. Cultural exports seen as valuable soft power to be used in negotiations with any third country. There are lots of areas where the UK drives creative partnerships in Europe so positive feeling the EU will want the UK to be involved in the future. Question was raised how we would manage if regulation diverged from EU. There should not be a presumption of the status quo, change could be an improvement and there were opportunities, e.g. to own UK consumer regulation.
It was acknowledged that the UK has skills gaps and needs to improve training of domestic talent. It takes time to train and gain experience, so in a post free movement UK, sector wants a flexible immigration system to enable access to talent with creative and STEM skills. Some sectors, such as computer games, have up to 30% non-UK workers. In some sectors, diversity and different perspectives seen as an asset, e.g. having international staff helps access international markets. Some parts of the industry are global and compete in a global pool for talent. It is difficult to get a replacement opera singer at short notice. One aspect of free movement that came up in several contexts was the ability of UK staff to move around the EU, such as for UK orchestras to tour, UK staff to escort valuable museum artefacts abroad, and for situations where a UK based international film crew can easily go to different locations across Europe. (One comment was that it was unusual to choose to film in the US because the visas and red tape made it too difficult.) It also enabled staff to come to the UK to work on short high profile events, such as London Fashion Week. A new immigration system needed to be able to facilitate that fluidity of movement, or competing European cities—such as Paris and Berlin—will benefit. There is a lack of coordination between Government departments—Home Office appear to stop some high profile arts or sports people used to demonstrate the immigration system is serious.
Important to be able to protect IP in the UK and in Europe. Projects without IP protection tend to have low margins, while projects which retain the IP have higher margins. Copyright and IP protection was mentioned in reference to several different sectors, from broadcasting to design, and IP protection needed to be included in any trade deal with emerging markets. The creative industries rely upon data flows between the UK and EU, and require a decision on the UK’s data adequacy from the EU. Data protection rules in the UK may have to be kept in line with the EU to access the single market.
AVMS Directive. Audio Visual sector the licence to broadcast in other countries from the UK is attractive. License holders want to be able to broadcast into the EU from the UK. Fearful if UK outside single market, then international broadcasters may not choose UK as a base, or will not choose it in the future. Many high standard drama productions for television are too expensive for a single broadcaster. Many are co-productions and London is a centre of skills and facilities. Free movement has helped London grow as a centre, and to enable international staff to move around locations. Single market has enabled UK publishing to be the bridge between the US and the EU. UK publishing understood the EU market better, and shared a common language with the US. Leaving the EU could help if it enabled the UK to reduce VAT on books.
Many visitors come to the UK for cultural experience—e.g. music festivals, theatre, sporting events. A multilingual workforce is important in hospitality sectors. ERDF had helped some regions to develop cultural industries. Eg artist traditions in St Ives and the Tate.
There was considerable discontent with the education curriculum, the lack of understanding and support for creative education. International students are important, bringing different ideas and skills, and also money. There was a fear that if Government did not understand the creative sector very well then it would be ill equipped to argue its corner in the negotiations. There was support for the UK’s continued involvement in transnational funding and academic cooperation, such as Horizon 2020.
3 April 2017