UK Brexit tech vote

As had been widely expected, last night parliament voted against the ratification of the UK’s Withdrawal Agreement with the European Union. Opposition to the agreement was overwhelming, with 432 MPs voting against, versus 202 for. Industry experts were quick to respond.

Gerard Grech, CEO of Tech Nation, said: “The prospect of the UK leaving the EU without a deal is becoming alarmingly real. This is the last thing that anyone in the digital tech sector wants and would be very damaging for a sector that has, up to now, been growing at almost three times the rate of the rest of the economy.

“The Prime Minister must take urgent steps to make sure that some sort of deal is secured that gives certainty to the EU nationals who currently work here as well as to ensure that the we remain an open and attractive economy to the international tech talent that wants to work or start a business in the UK.

“Tech Nation will continue to champion a smart immigration policy that embraces talent from all four corners of the globe, as well as an adaptive regulatory environment which balances faster innovation with smarter consumer protection.”

UKFast CEO, Lawrence Jones, agrees that a no-deal Brexit would be bad news. Commenting on the latest Brexit developments, he said: “What’s needed is to listen to the voters and look at the facts. It’s clear that this deal is popular with no one so we have to find a different way to leave while avoiding a no-deal situation.

“Theresa May would be in a stronger position if she’d brought people from other parties in on the negotiations. This is a national issue, not a Labour or Conservative issue. The lack of consensus has caused delays in the process which are bad for UK tech and bad for UK businesses generally.

“She should now involve Corbyn and members of the Shadow Cabinet to negotiate a new deal, so there is greater buy-in from across parliament. During the war Churchill brought many of his greatest political rivals into the Cabinet, and that’s perhaps what’s needed now.

“Having said that, it feels like certain MPs are acting for personal gain rather than for the good of the country. It’s not the right time to make a grab for power, it’s time to focus on getting through this difficult moment.”

Some think a disorderly Brexit could add 1% to the Retail Price Index (RPI) which inflation is based on. Thomas Wells, manager of the Smith & Williamson Global Inflation-Linked Bond, is one of them. Following the vote he said: “Inflation expectations have been dominated by the increased possibility of a no-deal Brexit, which has re-emerged as one of the probable scenarios.  As a result, breakeven rates of inflation have climbed to above 3.2% across all the key horizons – five years, 10 years, 20 years and 30 years.

“Indeed, if you look at the 20-year breakeven rate as an example, it is telling you that inflation is going to run at 3.5%. That cannot be described as benign.

“The exact impact of a disorderly Brexit is very hard to judge as we would be in uncharted territory, but most of the research we have seen suggests that it could add at least a full percentage point to the headline Retail Price Index figure.”

And Schroders’ senior European economist and strategist Azad Zangana believes we will see a recession in 2019 in the event of a no deal. He said: “If the government persuades parliament to ratify the current or augmented agreement, then the UK will proceed to leave the EU on 29 March, and enter a transition period. During this period, the future relationship including trade, customs arrangements and regulatory alignment should be finalised.

In the absence of a deal being ratified, the UK will be leaving the EU without a transition period, and is likely to face significant trade tariffs in accordance with World Trade Organisation (WTO) rules, along with full customs checks, and a number of other important memberships/associations with EU institutions lapsing. Given the fragile state of the UK economy, we would then forecast a recession over 2019.

“We believe that the possibility of a remain result following a second referendum and the prospect of a delay to Brexit, have helped boost the pound in recent days against the US dollar and the euro. Markets seem to be pricing in a greater probability of a “soft Brexit”. However, we believe that investors are getting ahead of themselves.

“The main uncertainty now is how the Labour party will react if they fail in their bid to trigger a general election. Will Corbyn work constructively with the government to end the deadlock, or will he continue to obstruct the process?

“The Labour Party’s six tests for Brexit focus on the future relationship, which are irrelevant at this stage of the negotiation. Though not the official position, many in the Labour Party including Shadow Brexit Secretary Keir Starmer and Deputy Leader Tom Watson believe that a second referendum should be the next option.”