Leaving the European Union is likely to be tough for the UK's tech sector. The question is
: How tough will it get?
Its still hugely unclear how the UK's exit from the European Union is
going to be managed (or if it will even take place), but market-watchers
are trying to sketch out how the breakup is likely to impact the tech
industry.
Analyst IDC said there is a tendency to curb or stop
discretionary investments, including non-essential IT investments and
projects "very quickly in these types of situation". Their most positive
-- but least likely scenario -- has UK tech spending bouncing back by
2017, while under their most pessimistic model, it won't bounce back
until 2020.
Although IDC said UK IT spending forecast will likely
drop by more than 2 percent by 2020, overall European IT spending
should remain largely unaffected.
The analyst house has set out three Brexit scenarios:
1. Challenging - 70 percent probability
This
scenario plots a downward drop in UK GDP, which will then see a slight
drop in UK IT spending in 2017 and 2018, but demand will recover in 2019
and 2020, and the UK IT market will return to its pre-Brexit levels by
2020. The scenarios also sees IDC revise IT spending forecasts downward
by more than 2 percent through to 2020. Western European IT spending is
expected to remain fairly stable. IDC believes that this is the
most-likely scenario.
2. Disruptive - 20 percent probability
This
is the most pessimistic scenario, in which political confusion, more
referenda, and "immense pressure" on the EU creates further economic
uncertainty. IT spending in this scenario is expected to significantly
decline in the short term and struggles to rebound by 2020. If that
happens, then IT spending could drop by close to 5 percent through to
2020. Also, under this scenario, Brexit will have "more far reaching
consequences, including headquarter, workforce, and factory relocations
impacting IT spending", the analysts warned.
3. Swift - 10 percent probability
This
assumes strong leadership and an orderly Brexit process occurring that
avoids short-term turmoil and drives economic growth in the medium term.
IT spending is mildly affected in the UK in 2016 but rebounds quickly
in 2017 and beyond. Europe IT spending is unaffected.
