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Brexit and the Impact of the Divorce Principles on the Technology Sector’s Talent Pool

The impending exit of the United Kingdom from the European Union—known as Brexit—has brought into question the future of the UK’s standing as the Silicon Valley of Europe.

June 21, 2018 | By Lara Doyle

split egg shell with EU and UK flags

What will the impact be to employment and access to available talent in Europe?

In early December 2017, the Brexit Divorce Principlesthe key negotiable objectives of the first phase for the United Kingdom’s (UK) impending exit from the European Union (EU)were finally agreed.

The three principles core to the ‘divorce’ proceedings are:

  • Guaranteeing the rights of EU citizens
  • Protecting the Irish border
  • Agreeing to foot the Brexit bill

The UK and the EU have also agreed to cooperate on nuclear, police and security issues and agreed to ensure that there will be continued availability of products on the market before Brexit to minimise disruption for businesses and consumers.

On 20 December 2017, the European Commission recommended draft negotiating directives for the second phase of the UK’s withdrawal, and negotiations are set to continue.

As the negotiations continue to play out, uncertainty reigns supreme. Of the many concerns raised by Brexit, one of the most pressing is the impact leaving the EU will have on the British economy and the labour market.

Despite political posturing, media doomsaying and general disheartenment being expressed by senior business leaders, there are indications in early 2018 that the outlook might not be as gloomy as anticipated.

The National Institute of Economic and Social Research has estimated that the UK economy grew by 0.6% in the final quarter of 2017, “driven by both the manufacturing and the service sectors, supported by the weaker pound and a buoyant global economy.”

UK employment rates have continued to rise annually since 2011 (data: Office for National Statistics [ONS]. There are indications that UK businesses are likely to create jobs in 2018: the CBI has found that 51 per cent of firms across the UK will grow their workforce in the year ahead. CityA.M. reported more than two-thirds of London’s financial services firms plan to recruit staff over the next 12 months, with the majority planning to bring permanent staff on board.

There is major unease, however, over the impact Brexit will have on the available talent pool. The ONS has released figures suggesting that net migration dropped by 106,000 in the 12-month period since the Brexit referendum took place. This is the largest fall in any 12-month period since records began in 1964.

The UK technology industry employs 1.5 million people, and it is growing at twice the rate of the wider economy. In short, the industry is imperative to the UK, and all steps should be taken to protect Britain’s position as a global technology leader, to urgently close the skills gap from within and to continue to attract highly skilled professionals from the EU and beyond.

A Brexit without freedom of movement between the EU and UK will mean that businesses will not have access to a wide talent pool, and they will find it hard to recruit for highly skilled positions. Talent could also become potentially more expensive.

While one in five technology jobs are held in London, figures from The Recruitment & Employment Confederation (REC) suggest that 68 per cent of UK digital tech investment was made outside London, with Edinburgh, Cambridge, Bristol and Bath, Oxford, Manchester and Sheffield attracting almost £700 million of investment between them. The pinch to the technology sector and employment as a whole will be felt throughout the UK.

Non-Europeans who are already working in the UK’s technology sector should be relatively unaffected by Brexit in the short term (conditional on whether Britain maintains its global position in the industry). However, those EU nationals already embedded in the UK industry are probably experiencing a period of stressful uncertainty. Technology businesses can go a long way to support their current employees by engaging them with regular communications. It is critical that right now they are made to feel like important and contributing members of the business.

In the meantime, while the Brexit negotiations continue, organisations should use this opportunity to identify at-risk areas of the business such as a concentration of EU employees or where succession plans are reliant on an EU employee. This is the time to be putting contingency plans in place, prioritising recruitment plans and identifying and investing in future sources of talent.

But as technology giants such as Google, Facebook and Snapchat have announced their intentions to expand in London in spite of Brexit, the government is set to double the number of visas available to exceptional workers in areas like digital technology to 2,000. In a statement, Prime Minister Theresa May said, “Technology is at the heart of our modern industrial strategy, as we will continue to invest in the best new innovations and ideas, in the brightest and best talent and in revolutionary digital infrastructure. And as we prepare to leave the European Union, I am clear that Britain will remain open for business.”

Most recently, a £2.5 billion Patient Capital programme and new startup visas were announced by the prime minister. “The measures we are announcing today will allow innovative British startups to invest in their futureand in the UKby hiring more skilled people, expanding their business and exporting their expertise across the world.

“It’s a great time to be in tech in the UK, and our modern industrial strategy will drive continued investment, ensuring the nation flourishes in the industries of the future and creating more high-paying jobs.”