What Does Brexit Mean for the Internet of Things?

Britain's exit from the European Union is creating massive uncertainty for the U.K. economy. Technology firms, including IoT players, face potential challenges to their markets, funding and workforces, but they can also take advantage of fresh opportunities.
By Nick Monnickendam
Aug 05, 2016

At the end of June 2016, citizens of the United Kingdom approved a referendum to leave the European Union (E.U.), after more than 40 years of membership. How this British exit, or "Brexit," will pan out is highly uncertain, but it will likely impact the ability of citizens of E.U. member-states to live and work in the United Kingdom and the European Union, and could limit U.K. firms' access to the E.U. market. It could be that freedom of movement (and associated migration), as well as market access, will both be significantly reduced. But it is also entirely possible that an agreement will be reached that will still allow for significant freedom of movement, as well as highly favorable market access.

Let's consider the potential impact of Brexit on companies focused on the Internet of Things. While there are undoubtedly challenges to overcome, the United Kingdom has many underlying strengths that should continue well beyond the time that Brexit comes into force.

A Leading Role in the IoT
The United Kingdom has contributed real leadership in emerging Internet of Things markets. In spite of Brexit, there are many reasons to believe that Britain can maintain and grow a leading role in the IoT.

To start with, we are a nation of creators and innovators. London is Europe's startup capital, and there are tech clusters in cities U.K.-wide. The influx of foreign nationals from the European Union and elsewhere has helped to fuel this growth, injecting diversity and dynamism. Many U.K. startups contribute to the Internet of Things, including in such areas as payments and blockchain technology, which will play important roles as the IoT shifts from pilots toward wide-scale adoption.

The startup scene is part of a large and growing digital economy landscape, valued at £161 billion ($211.5 billion) in TechNation's 2016 report. Within this, the single largest area is related to data, software and analytics, accounting for more than a third of the total. Regardless of how Brexit pans out, there will continue to be many opportunities to combine data from connected devices with other information, analyze it and deliver a wide range of apps and services. So the United Kingdom's strengths in these areas mean it is well placed to capture a significant slice of the value related to the IoT.

In addition, while the U.K. manufacturing sector may be small relative to services, there are many areas of excellence in high-tech design and production. Chip technology company ARM is the foremost among U.K. businesses—around Cambridge and beyond—that are leading the way in IoT hardware. The fact that Japan's SoftBank is acquiring ARM for $32 billion is a positive sign, proving that major players are still looking to make large-scale investments in the United Kingdom. Moreover, such investments can help to underpin growth and job creation, as we have seen in industries such as car manufacturing.

More broadly, the United Kingdom's capabilities across professional services, its leading role in setting international standards and the use of U.K. law in many international commercial agreements all convey advantages that should continue well after Brexit has come into effect. For example, Britain has created the Hypercat specification for the automated discovery of IoT data. The specification was recently certified by the British Standards Institute (BSI), and the BSI itself is one of the leading global players for the development of smart-city and wider industry-related standards.

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