New report shows Brexit risk & opportunities for tech sector
Monday, 4 December 2017
Technology Ireland, the Ibec group that represents the technology sector, today published a major new report, ‘Brexit and the Irish technology sector’, which with sets out key Brexit risks and opportunities, along with recommendations for the future EU-UK relationship. The report, compiled by leading European economic consultancy Frontier Economics, highlights the potential for significant disruption to Ireland’s digitally-intensive sector, but says this could be partially compensated for by business moving from the UK to Ireland in response to Brexit.
Speaking at the launch, Technology Ireland Director Paul Sweetman said: “Ireland’s digitally-intensive sectors are intrinsically linked to the global market and are heavily trade dependent. The outcome of Brexit negotiations could have a far reaching impact on the sector. Ireland must respond pro-actively to minimise the risks and maximise the opportunities presented by any market disruption.“
Key risks and opportunities include:
· R&D risk: A large proportion of EU-funded R&D projects with Irish participants have UK partners. A reduction in funding to the UK, and diversion to other EU member states, could affect Irish R&D, and therefore the attractiveness of Ireland to digital sector firms.
· Data risk: The UK may need to negotiate access to GDPR or equivalence. This may impact Irish tech firms given the close linkages with the UK.
· Data opportunity: Should issues around post-Brexit data flows between the EU and the UK not be resolved, there is the potential for diversion of investment to Ireland, as digital companies look to ensure ease of access with the EU.
· Regulation risk: Fragmentation may occur unless EU regulation is regularly transposed into UK law. This may limit market access or increase the cost of business associated with relying on UK suppliers as part of the supply chain.
· Market opportunity: Firms may relocate activities to Ireland from the UK to minimise the effects of non-tariff barriers and regulatory compliance costs.
Key recommendations for EU-UK negotiations:
· General Data Protection Regulation (GDPR): In the event of a hard Brexit, additional legal protections will be required in order to transfer personal data from EU Member States to the UK. It is essential either to have in place a transition arrangement to deal with such an outcome, or to ensure that any UK application for an adequacy decision from the European Commission is in place on the effective date of Brexit.
· Services: Services form an important element of the Irish technology sector supply chain. In the event of a hard Brexit the WTO/MFN terms provide far less certainty and security of access for services. It is essential that any transition arrangements provide for trade in services, not just trade in goods.
· R&D: For R&D it is vital that a smooth transition is put in place to ensure that Irish research organisations are not disadvantaged as a result of their historical relationships with UK research bodies.
· EU state-aid rules: If the UK is outside the single market, it may be less constrained by EU state-aid rules. It is critical that any transitional and ongoing arrangement with the UK ensures that there is a level playing field for international investment.
Key recommendations for the Irish government, as it prepares for Brexit:
· Growth capacity: Ireland needs to ensure it has the capacity to grow should investment be diverted from the UK to Ireland. Including investment in infrastructure gaps or skills shortages.
· Increased R&D capacity: Ireland needs to implement Innovation 2020, putting in place the necessary funding to grow the capacity of the R&D sector in Ireland. We need to invest in R&D infrastructure, skills, and research frameworks in order to ensure talent is located into Ireland, and that R&D activity can grow in centres of excellence.
· Diversify partners: We must strengthen cooperation between Europe’s ‘Digital Frontrunners’ in order to help shape the European regulatory direction in a way which will maximise the growth potential of the digital market. Government must support the research sector in Ireland to develop new partnerships with other EU R&D, to strengthen and create new connections and collaborations.
"Ireland is now a global powerhouse in digital technology, employing over 120,000 people in a multitude of business and technology roles, with businesses adding approximately 100 new jobs per week over the past five years. Since 2013, the sector has grown at an average of 12% per annum, and now accounts for about 13% of national GDP. While the sector is not overly reliant on the UK at an aggregate level, for some firms and industries the UK is vital source of inputs and an important export market. The Irish approach to Brexit needs to be informed by this,” Mr Sweetman concluded.