Quick Take: Brexit And The UK Media And Tech Sectors

The UK referendum on membership of the European Union has resulted in a vote to leave. There could be countless implications for the UK media and tech sectors but smaller companies such as independent labels, independent production companies and tech start ups look set to be hardest hit.

We Are Entering The Unknown

Fundamentally the Brexit vote ushers in a period of the unknown. These are uncharted territories, not least because how things shake out depends on how leaders of continental European markets want them to shake out. The transition will be a lot smoother if the prevailing attitude is one of wanting to minimize regional disruption than if they want to give the UK a bloody nose. Both scenarios are strong possibilities. Whatever the outcome, it is likely that trading with EU countries will be less straightforward for UK companies than it is now. Which will at the very least result in a higher administrative burden. For big companies like commercial TV companies and major record labels this will be an additional cost that can be shouldered. But for smaller companies the administrative burden – and potential trading levies – could become an unsurmountable barrier to trading in Europe.

Financial Markets Will Play A Major Role

But long before the raft of UK – EU negotiations start to bear fruit, the financial markets will play a defining role. The markets are already showing volatility that could result in far reaching implications for all aspects of the music business. The value of the pound surged on news that polls suggested a remain vote but collapsed to a 31 year low on news of the leave vote. Buying goods and services from across the globe, not just Europe, looks set to become more expensive for media and tech companies of all sizes due to the weakening of the pound on the international currency markets. Though the flip side of a weakened pound is that British goods are cheaper to buy, so export demand could rise.

Investment For UK Tech Companies Could Slow

Capital and investment could also be affected. Not only do many UK based media and tech companies benefit from EU subsidies – which will of course dry up – but the UK is also the European centre of finance. Though UK start ups may complain how much more difficult it is to raise investment in the UK compared to the US West Coast, it is still much easier than in much of Europe. Should elements of the UK financial system start to deliver on their promises to relocate in the face of a Brexit, the knock on effects could be a slow down in finance further down the chain. Which in turn would dent the vibrancy of the UK tech start up scene.

All of the above could happen, but equally much of it may not. And that is the heart of the outlook for post-Brexit vote UK: we simply don’t know. The only probability is that larger media and tech companies are likely to weather the storm better than smaller ones.