British business leaders reacted with weary dismay to Parliament’s rejection of Prime Minister Theresa May’s deal with Europe. The Brexit vote loss by 230 votes was the largest in modern British history, with only a defeat in 1924 coming close. A vote of no confidence in the government follows this evening. Most analysts expect the government to survive it.
The Confederation of British Industry (CBI)’s Director General Carolyn Fairbairn said: “Every business will feel no deal is hurtling closer. A new plan is needed immediately. This is now a time for our politicians to make history as leaders. All MPs need to reflect on the need for compromise and to act at speed to protect the UK’s economy.”
Tesh Durvasula, President, Europe, of Data Centre provider CyrusOne, commented: “Last night’s vote on Brexit was grimly predictable. As a recent import from the US, I find myself looking on with a mixture of fascination and frustration. Fascination because we are in the midst of a truly ‘once in a generation’ moment in UK political history. Frustration because as a the regional leader of a business with significant ambitions for expansion in Europe, the picture is no clearer today than it was yesterday.
“Brexit or no Brexit, the explosion of technologies including AI, IoT and machine learning continues to gather pace. Forthright decision-making and investment in infrastructure is required to fully realise the potential of these technologies. The political wranglings between the EU and the UK should be nothing more than an addendum to this issue, but the lack of a clear path is increasingly becoming a roadblock. We cannot ignore what is happening in parliament, but I fear it is becoming an excuse for inertia at a time where momentum is required.”
Microsoft is among those that has warned about a no-deal.
In an early blog saying it welcomed the PM’s proposed deal, the company noted: “Many of our customers and partners operate businesses that rely on Microsoft’s cloud computing services. These businesses require the frictionless flow of data across borders in order to operate effectively. We have consistently advocated to the government the need to ensure this data flow continues post-Brexit…. Leaving the EU with no deal would create significant uncertainty with respect to these two priorities.”
Data Flows at Risk
In an emailed comment, the DMA Group’s CEO, Chris Combemale, echoed the point: “A no-deal Brexit would create severe uncertainty for the data and marketing sector and could potentially bring EU to UK data flows to a halt. This would have further knock-on effects on the UK public, with jobs moving to the EU and investment also decreasing.
“The UK needs to be granted adequacy status by the EU Commission but the process can take years to complete. Adequacy status allows personal data to be freely exchanged, just like the UK currently does as a member of the EU.”
He added: “For example, a UK-based company that has EU customers may use an EU-based data centre, but the information is processed at the UK HQ. If the UK leaves the EU without a data deal this company would lose access to its own data, as transfers from the EU to UK would be prohibited. The company would need to find a new supplier or may move operations to the EU, so it can efficiently serve EU-based customers and not have to worry about transferring data from the EU to the UK.”
Wiltshire-based data analytics consultancy, Mango Solutions’ CEO Matthew Aldridge added: “Hiring people with the right skills is one of the biggest challenges for UK businesses today. Demand for data scientists is off the charts, and it will take time for Government funding to filter through the education system to create that supply.”
He added: “I expect, therefore, that the Government will be forced to provide more visa coverage for countries outside of the European Union, such as China or India. The UK’s reputation, however, post Referendum, has descended from being a country that was open and embracing to being a country that pursues a strategy of isolationism. This could then make workers from anywhere in the world think a little harder about whether the UK is a good place to come and work.”
Brexit Vote: Markets See a Silver Lining
Despite the staggering scale of the loss, the FX market found a silver-lining and GBP strengthened. As ING bank noted: “This is likely a function of (a) the rather low probability of today’s no-confidence vote being successful (as gauged by the comments from the DUP and the pro-Brexit European Research Group) and (b) the increased likelihood that the Prime Minister may have to seek cross-party support for the new plan, with the perceived odds of an Article 50 extension rising.”
The bank’s analysts said: “We see material upside to the heavily undervalued GBP (the cheapest in the G10 FX space) by year-end, as by then we expect a market-friendly resolution of the Brexit stalemate. Yet, the near term price action is likely to remain volatile and headline driven.”