France and not Germany may be UK’s friend in Brexit tech talks

02 Mar 2017 | Viewpoint
With little sign of German flexibility on tech issues ahead of Brexit negotiations, the UK could have better luck extracting concessions from France

If Brexit is expected to be negative for German industry, you could not tell watching the head of the Brussels office for Bitkom, the German technology association, speak in the European Parliament this week.

Constantin Gissler, in words which echoed the strong line of the German government, was forthright about how companies in Europe’s biggest economy are viewing Brexit.  

“German industry is more concerned about the integrity of the single market than giving a special deal to the UK,” he said. “We don’t want to set a precedent for other countries.”

At this point, any discussion about Brexit necessarily involves a fair amount of shadow-boxing. All stances are preliminary, and everyone is keen to avoid handing the other side an advantage.

Early indications point to Germany as an unbending negotiator, however.  

Gissler, speaking on behalf of the biggest industry group in Europe with some 2,400 companies in the digital economy, was taking part in a hearing arranged by British MEP Vicky Ford on Brexit threats for the technology sector.

“Germany’s ICT industry doesn’t export a lot,” said Gissler. “Of the €190 billion turnover in my group last year, only €50 billion of that was exports. Our SMEs are not very international – 50 per cent don’t do anything beyond Germany. Those that do have their primary markets in German-speaking countries like Austria and Switzerland. And our big international companies? They’re already well established.”

Some companies are even looking forward to the reduced competition that will come with the UK’s exit from the single market, Gissler said.

“There are start-ups that tell us it will become easier after Brexit to attract international talent. If a well-trained Polish programmer comes to Germany instead of going to the UK – better for us,” he said.

Gissler said his comments reflected anecdotal evidence. But they chime with the general mood in Germany, where companies seem to accept their government’s argument that defending European values trumps disruption to the economy.

In January, in a survey of nearly 3,000 companies by the Cologne Institute for Economic Research, more than 90 per cent of firms said they didn’t see “strong effects” on them from the UK’s decision to leave the EU.

So, as Prime Minister Theresa May’s government prepares plans for Britain’s post-exit relationship with the EU, it seems she may have better luck counting on France to push for compromises.

Nicolas Brien, campaign director at the tech association France Digitale, was more willing than his German counterpart to identify what industry had to lose from Brexit.

“London is the top destination for our graduates and start-ups,” said Brien. “We say in France, ‘if you want to raise money for your start-up, just take the Eurostar’.” 

Brien said his main worries revolve around whether the UK will retain access to EU research programmes and continue to invest in the European Investment Fund, the main agent in Europe venture capital.  

As in Germany, there are voices in France calling Brexit an opportunity. “We will see entrepreneurs and VCs returning,” said Brien.

He is already seeing an impact. “It is definitely becoming less and less attractive to go across the Channel. Now you go to Dublin or Silicon Valley,” he said. “We try to raise our money in dollars and not in pounds because of currency fluctuations.”

But he made it clear that Brexit meant overall harm to investment in Europe. “There are definitely more downsides than upsides,” he said.

Going into divorce talks, Brien offers the UK government some pointers.

It should stop threatening to reduce corporate taxes and slash regulations in a play to become a Singapore-style tax haven on the perimeter of the EU, he said.

“Talking about cutting taxes, especially corporate tax, is missing the point,” said Brien. “If you want to go to a place with low corporate tax, you’ll go to Dublin. Britain also talks about deregulation – again, it’s missing the point. More important for start-ups is connection and harmonisation with EU laws.”

He called on negotiators to look at Norway, saying its arrangement with the EU is interesting. “And please come up with a solution on financial services that takes into account [the interests of] venture capitalists, not just banks,” Brien added. 

UK with cards of its own

Despite the numerous challenges faced by Britain ahead of crucial negotiations, it is not entirely playing from a position of weakness.

There is an acknowledgement that Britain’s attractiveness goes beyond membership of the EU: few in the UK’s bubbling tech scene are predicting a meltdown post-Brexit.

Conservative MEP Daniel Dalton, who voted to remain in the EU, said there was no place like the UK when it comes to supportive rules for companies. “You can set up a company in a matter of hours,” he said.

Britain is one of the Europe’s richest countries, with the most successful financial-services hub.

“The US has one of the harshest visa systems in the world, but French people still go to Silicon Valley, and they’ll still go to London,” Brien agreed.

Immigration controls would harm the UK, but also other EU countries, said Charlotte Holloway, policy director at London-based techUK, which speaks for 900 companies.  

She also said all countries need to find a deal on data passporting, so that data centres can continue to hold information on EU and UK nationals.

Despite the cool exterior in Germany, tech leaders will be willing its government to find compromise in a number of areas.

Gissler admitted that he is worried that cooperation, on topics such as data sharing and protection, will not survive Brexit.

“EU data protection laws will come into force before UK leaves. They will be interpreted by authorities here and there, there will be secondary legislation and ECJ decisions. Slowly, we may see the UK go in a different way, with the legal systems drifting apart. It’s very important that it doesn’t drift away too far,” he said.

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