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Why The UK Must Safeguard Its Software Sector Through Brexit Negotiations

03/08/2017 11:44
vchal via Getty Images

Software is ubiquitous. It is at the heart of every aspect of modern life. We depend on software at the office, at school, at home, in our leisure time, when we travel and when we communicate. Software helps us be more effective, more creative and more efficient.

Ironically, software is so pervasive that it one would be forgiven for overlooking just how much it contributes; from both an economic and job creation perspective. With Brexit on the horizon, it is more important than ever to consider how the industry may be affected.

We recently worked with the Economist Intelligence Unit to reveal the true value of software, both in the UK and more widely across the European Union. We wanted to quantify software's impact and to assess how the EU and certain member states gain from software's burgeoning influence.

The results from the research were intriguing. Overall, software delivers a total value-added (direct, indirect, and induced) GDP of £709.8 billion -- over 7 per cent of EU28 total GDP. This contribution comes from all sectors and all levels of the economy: farming, manufacturing, services, education, healthcare.

When you hone in on the UK, software's direct and indirect contribution is also substantial, and higher than any of the other four 'Big Five' EU markets (Germany, France, Spain and Italy). In 2014, the software industry added £50.9 billion directly to the UK economy, equivalent to 2.9 per cent of the country's GDP. When factoring in its full impact (including indirect and induced effects), software's contribution climbs to around 7.1 per cent of UK GDP, which is a staggering contribution of £124.8 billion to the economy.

The UK software sector also supports the employment of the most people, and has the highest percentage of total jobs, compared to the other major EU countries analysed in our study. It generates nearly 2.6 million jobs - more than twice the size of the entire population of Birmingham, and equivalent to 8.4 per cent of all jobs in the UK. Software also contributes 9.7 per cent of total private sector research expenditure in the country.

With Brexit negotiations looming, a new regulatory framework must be crafted to allow the software industry, and in turn the British economy, to thrive in a Brexit environment. To maintain its leadership of the IT industry, the UK needs to have a better, or at the very least equal, regulatory environment - and one that is fully aligned with international and EU regulations.

It will be important to devise legislation that is future-proof to avoid stifling innovation or delaying the uptake of new technologies. Countries choosing policies that encourage technological developments and support a digital economy boost their competitiveness and guarantee their role as hubs in the globalised economy.

To keep pace with growing global competition, the UK must embrace software's potential. The regulatory landscape needs to acknowledge the inherently global nature of the software industry while leaving room for digital innovation.

Championing the free flow of data across borders without unnecessary restrictions would send a strong signal, as would embracing fully the development of the next generation of digital standards in international fora and opposing mandates on the localisation of servers and other computing infrastructure.

Our health, wealth, work, social lives, leisure and security are all improved by software, and the potential for further benefits is limited only by our imagination. Software is the key to realising the benefits of the 21st century and beyond; the new UK Government will need to seize the opportunity.

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