The UK’s exit from the EU will create the need for a new national IT infrastructure as the country turns its back on the dream of a more integrated European data economy, according to American technology companies that already have their eyes on the work.
The new facilities will include new data centres and border controls to enhance security and ringfence national data.
However, building a secure island of IT will weaken some of the benefits promised by cloud computing and Balkanise data flows, others have warned.
The abandonment of EU privacy rules and other regulations for data will inevitably force British companies to store and process information locally, according to tech experts.
“For us this improves the opportunity,” said Inder Singh, head of strategy and marketing at Unisys, an IT services company whose UK customers include the Metropolitan Police and Lloyds Bank.
“Financial institutions will be affected — they will be looking to migrate their infrastructure onshore to the UK rather than spread it across Europe,” he said. “To the extent you’re creating extra borders within Europe, you’ll only see that trend accelerating.”
An executive at one of the biggest US tech companies, who declined to be named, said the Balkanisation of the European tech infrastructure would mean UK companies would not see the full benefits of cloud computing, which stem from the huge economies of scale and “frictionless” movement of data that come from a borderless approach to IT.
But this person added: “If companies start pulling data within their borders, companies like ours are well-positioned. We wouldn’t recommend it, this could have a chilling effect on cloud technologies, but we’re well positioned for it.”
Ringfencing data in national borders will add to overall tech costs and favour established IT companies at the expense of start-ups, another said. “It makes it very expensive because of the tech architecture you have to implement,” said Aaron Levie, chief executive of Box, a US cloud storage company with operations in Europe.
Box and other established cloud companies, mostly based in the US, have already reconfigured their systems to take account of a growing data isolation that has been required as countries such as Germany seek to ensure the privacy of their citizens, he added. “It becomes harder if you’re a start-up that hasn’t addressed that challenge.”
At the same time, a divergence of UK and EU data rules could make it harder for UK-based companies to transfer data across borders and deal with customers based in the rest of Europe.
A similar dispute erupted between the EU and US last year, after the European Court of Justice ruled that American privacy protections did not meet European standards.
“The risk is that the [UK] government might say: forget the EU, let’s go it alone,” said Eduardo Ustaran, partner at law firm Hogan Lovells, referring to any new data and privacy rules that might be created. “The issue is that you automatically put yourself outside the group of countries that are not regarded as adequate, like the US.”
Creating smaller national IT markets rather than a single regional infrastructure would also make it difficult to build European tech companies capable of matching the US and emerging Chinese giants, another cloud computing company warned.
Cloud service providers would not be able to reach the scale needed to compete with global rivals, instead forcing them to rely on local data centres run by Amazon Web Services and Microsoft, which already operate at an order of magnitude, this person said. “What we’re moving towards is a duopoly of AWS and Microsoft. That will in and of itself be a problem.”
Among the tech markets likely to be boosted are the ones for border controls, which now rely on many advanced scanning and other technologies, said Mr Singh. “You can only see that demand growing — you can see increased borders between Europe and the UK, and more controls to handle inbound [traffic],” he said.
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