The CEO of techUK talks about the country's data economy and the difficulty of stopping data at the borde

Vieira, Helena

LSE Research Online

Julian	David:	‘We	need	to	get	the	data	issue	right	inthe	Brexit	negotiations’As	businesses	in	all	industries	become	increasingly	digital,	describing	the	technology	sector	as	a	separatecategory	makes	a	little	less	sense.	Banking,	retail,	the	media	and	all	kinds	of	services	are	going	online.	Thisdigitalisation	of	economic	activity	poses	a	challenge	to	the	idea	of	borders,	and	makes	the	Brexit	negotiationsespecially	difficult.	Julian	David,	CEO	of	techUK,	an	association	representing	950	tech	companies,	says	that	alarge	number	of	industries	today	exist	in	the	context	of	moving	data.	“What	is	banking?	It’s	0’s	and	1’s,	isn’t	it?’	heasked	LSE	Business	Review’s	managing	editor,	Helena	Vieira.	“We	need	to	get	two	issues	right	(in	the	Brexitnegotiations):	data	and	talent’,	he	said.	They	spoke	during	Web	Summit,	in	Lisbon,	on	7	November.We	know	that	80	per	cent	of	the	UK	economy	is	in	services.	How	much	of	it	is	represented	by	the	techsector?If	you	take	a	broader	sense	of	technology,	which	is	technology	suppliers	and	digital	intensive	industries	–	thingslike	banking,	financial	services,	creative	industries,	and	so	on,	we’ve	done	a	report	that	has	it	at	16	per	cent	oftotal	UK	GDP,	so	it’s	huge.	We	define	the	digital	sectors	as	the	12	most	intensive	digital-producing	or	digital-usingsectors	—	a	group	that	is	likely	to	increase	as	more	sectors	digitise.	And	96	per	cent	of	these	digital	sectoroutputs	are	services-based.We	know	little	about	how	Brexit	will	evolve.	Is	it	possible	to	foresee	the	impact	on	tech	companies?You’re	right,	we	don’t	know,	which	is	a	bit	concerning	in	itself,	a	year	on,	and	it	depends	on	the	outcome.	Twoissues	really	need	to	be	got	right	among	a	list	of	five	that	we	recently	published.	The	first	issue	is	data.	The	pointabout	services	is	that	it’s	really	driven	by	data.	Data	flows	in	the	UK	is	about	3	per	cent	of	GDP,	but	it’s	12	percent	of	global	data	flows.	So	we’re	a	data	economy,	and	a	lot	of	that	goes	to	the	EU,	so	if	we	don’t	get	our	datarelationship	right	out	of	Brexit,	that	will	be	a	big	issue.	The	second	big	issue	is	talent	and	skills.	The	UK	hasattracted	talent	and	skills	from	all	around	the	world	but	a	significant	amount	is	from	the	EU,	and	in	particularthey’re	very	easy	and	flexible,	which	is	what	you	need	in	a	fast	growing	tech	environment,	so	if	we	aren’t	able	toget	those	skills	and	keep	them	in	the	UK,	that’s	going	to	be	an	issue.Can	you	explain	what	you	mean	by	data	flows	and	what	are	these	companies	that	are	heavy	in	data?LSE Business Review: Julian David: ‘We need to get the data issue right in the Brexit negotiations’ Page 1 of 5		Date originally posted: 2017-11-23Permalink: http://blogs.lse.ac.uk/businessreview/2017/11/23/julian-david-we-need-to-get-the-data-issue-right-in-the-brexit-negotiations/Blog homepage: http://blogs.lse.ac.uk/businessreview/Well,	if	you	think	about	the	sectors	that	our	report	features,	industries	from	telecom	to	software	to	devices	andmore	conventional	computer	equipment.	And	then	you	think	about	industries	like	financial	services,	professionalservices,	creative	industries,	media	and	others	like	that…	Those	are	the	industries	that	exist	in	the	context	ofmoving	data.	What	is	banking?	It’s	0’s	and	1’s,	isn’t	it?	Nobody	carries	a	big	chest	of	gold	around	anymore.	It’s	alldone	in	computers.	And	that	is	what	goes	on.	So,	any	trade	and	e-commerce,	anything	like	that	is	driven	by	dataflows	and	you	need	data	flows	to	make	that	happen.	And	increasingly	even	physical	goods	are	getting	dataattached	to	that.	If	you	think	about	supply	chains,	something	like	automotives,	there’s	an	awful	lot	of	data	thatmoves	around	with	the	components.	If	you	don’t	have	good	data	flows	between	the	main	economies,	the	maintrading	partners,	that’s	going	to	be	a	problem.…	we	want	to	be	a	global	trading	nation.	We	want	to	strike	free	tradeagreements	around	the	world.	Well,	there’s	a	huge	one	right	at	ourdoorstep.So	the	UK	tech	sector	is	data	heavy…Yes,	it’s	a	services-based	sector	and	75	per	cent	of	those	services	go	to	the	EU.	Yes,	we’re	looking	to	expandand	we	are	expanding	our	trade	with	other	economies	around	the	world.	But	we	need	to	preserve	that	75	per	centwhile	you	expand.In	a	recent	interview,	Adam	Posen,	of	the	Peterson	Institute,	said	the	UK	may	even	strike	a	tradeagreement	with	the	US,	but	it	would	be	more	symbolic	than	anything	since	the	two	countries’	are	about80	per	cent	services,	competing	in	the	same	sectors…There’s	a	lot	of	work	and	a	lot	of	business	between	the	UK	and	the	US	tech	sectors.	It	already	is	happening.Building	a	free	trade	agreement	with	the	US	would	be	a	great	thing.	Including	services	agreements	in	free	tradeagreements	is	not	something	that	has	been	commonly	done,	it’s	not	very	easy	to	do.	It’s	generally	a	small	part	orthere	are	restrictions.	It	would	be	great	to	do	that	with	the	US,	but	it’s	not	an	easy	thing	to	do.	Do	they	competewith	us?	Yes,	they	do,	but	equally,	they’re	also	present	in	the	UK.	I	mean,	a	huge	amount	of	the	UK	tech	industryis	international	companies	based	in	the	UK.	These	international	companies	are	just	as	interested	in	getting	thedata	flow	arrangement	and	the	services	agreement	and	the	trade	agreement	right	with	the	EU,	from	the	UK	asour	tech	companies	are.	In	fact,	Wilbur	Roth,	the	US	Secretary	of	Commerce,	was	in	the	UK	this	week,	talkingat	the	CBI	conference,	and	he	made	the	point	that	a	lot	of	US	companies	came	to	the	UK	in	order	to	do	businessacross	Europe.	And	they’re	very	interested	in	us	getting	the	right	deal,	the	right	arrangement.	You	can	say	thesame	about	Japanese,	Chinese	companies.	International	companies	want	to	be	able	to	trade	across	the	whole	ofEurope.Would	Brexit	not	taking	place	be	the	ideal	for	you?This	is	an	interesting	one.	Our	industry	didn’t	want	Brexit.	That	was	very	clear.	We	polled	our	members,	and	theywere	overwhelmingly	(85	per	cent)	in	favour	of	staying	in	the	EU,	particularly	the	single	market.	Lookingparticularly	to	exploit	the	growing	digital	single	market.	However	we	are	where	we	are.	So	what	people	are	nowsaying	is,	“well,	if	there	is	going	to	be	a	Brexit,	then	it’s	really	got	to	take	account	of	these	issues,	and	the	bestway	to	do	that	is	the	single	market.	We’re	saying	that	our	industry	wants	to	stay	in	the	single	market.	We	had	aconference	last	week	and	we	asked	the	question,	these	instant	feedback	things	that	you	do,	instant	polls,	andagain,	it	was	90	per	cent	of	people	saying	the	single	biggest	issue	for	them	was	Brexit.A	common	example	of	the	difficulties	of	Brexit	is	the	automobile	industry,	whose	supply	chain	crossesborders	back	and	forth	between	the	UK	and	Europe	many	times	before	the	final	product	is	ready	to	beshipped	out	of	the	UK.	Is	the	example	valid	for	the	tech	industry?LSE Business Review: Julian David: ‘We need to get the data issue right in the Brexit negotiations’ Page 2 of 5		Date originally posted: 2017-11-23Permalink: http://blogs.lse.ac.uk/businessreview/2017/11/23/julian-david-we-need-to-get-the-data-issue-right-in-the-brexit-negotiations/Blog homepage: http://blogs.lse.ac.uk/businessreview/Yes,	if	you	think	about	what	I’ve	mentioned	on	services	and	if	you	think	about	the	number	of	internationalcompanies	that	trade	across	the	whole	of	Europe,	they	do	that	as	an	integrated	proposition.	They	want	to	be	ableto	provide	services,	and	if	you	think	about	the	ancillary	industries…	I	don’t	know	if	you	know,	but	something	likehalf	of	all	TV	production	in	Europe	is	done	in	the	UK,	and	then	it’s	broadcast	in	one	shape	or	another.	We’retalking	about	all	sorts	of	companies,	including	Amazon,	Netflix,	etc.	So	if	you	lose	the	ability	to	do	that	because	ofrestrictions	on	country	of	origin	or	original	content	or	just	really	other	regulatory	issues,	that’s	going	to	have	a	bigimpact.	The	same	applies	to	people	running	cloud	services,	or	other	services	across	Europe.	They	need	to	beable	to	service	that	from	one	single	point,	and	at	the	moment	a	lot	of	that	is	in	the	UK.	So	it’s	really	going	to	be	aproblem.	Then	if	you	broaden	it	out,	you	think	about	all	of	the	other	industries,	they	move	data	around	the	placejust	as	much	as	the	automotive	industry	moves	And	we’re	already	seeing	again,	there	was	a	survey	out	recentlythat	showed	that	European	companies	are	starting	to	think	about	their	supply	chains,	starting	to	look	at	how	dothey	deal	with	the	potential	that	they	won’t	be	able	to	move	components	from	the	UK	the	way	they	used	to.You	want	to	be	global,	Britain?	You’ve	got	to	behave	like	it.	Access	to	the	EU	market	is	key,	then…Just	to	stress	this,	we	want	to	be	a	global	trading	nation.	We	want	to	strike	free	trade	agreements	around	theworld.	Well,	there’s	a	huge	one	right	at	our	doorstep.	So,	really,	it’s	really	important	to	get	on	it.	Despite	whatpeople	say,	proximity	does	matter.	The	UK	does	more	trade	with	the	EU	than	it	does	with	the	US.	And	particularlyin	services,	the	ability	to	move	people,	which	is	often	a	component	part	of	the	service	provision…	Yes,	ourindustry	makes	stuff	available	now	through	virtual	means,	online	means,	etc,	but	there’s	still	that	need	to	do	thatand	to	have	a	recognition	of	your	services,	your	professional	standards,	regulatory	agreements,	dataarrangements,	intellectual	property	rights,	all	things	like	that.Without	passporting	rights,	will	fintech	have	to	look	for	other	markets?	What	would	the	impact	be?Fintech	is	looking	for	other	markets	and	it’s	global.	Even	places	that	don’t	have	a	great	financial	services	footprintcan	and	produce	fintech	solutions.	For	instance,	Israel	doesn’t	have	a	big	financial	services	industry	but	theyhave	quite	a	lot	of	innovative	stuff	going	on.	The	challenge	is	what	makes	you	the	centre	for	this	stuff	versusanywhere	else,	and	sets	a	connection	for	everything.	London	is	a	perfect	place.	It	has	a	financial	servicesindustry,	a	tech	industry,	legal	and	professional	services,	fantastic	regulatory	environment,	all	in	one	place.	Thetime	zone,	English	law,	which	is	really	important	in	financial	transactions.	A	huge	amount	of	financial	transactionssay	that	they	will	be	done	under	the	English	contract	law,	even	if	they’re	not	connected	to	England.	Put	all	that	lottogether	in	one	place	and	we	have	a	standout	success	factor.	Start	to	break	it	up,	that’s	an	issue.	Now	this	is	anissue	for	Europe	as	well,	by	the	way,	because	the	idea	that	you	can	disassemble	London	and	grow	it	in	six	to	tenother	places	around	Europe,	is	just	for	the	birds.	It’s	not	going	to	happen.	Some	stuff	will	move,	we’re	seeing	that.And	some	stuff	will	start	to	grow	in	new	places.	But	the	likelihood	is	that,	if	we	don’t	reach	an	agreement,	this	stuffwon’t	be	moving	to	places	in	Europe.	It’ll	be	places	like	Hong	Kong…	That’s	the	price	for	both	Europe	and	theUK.Europe	doesn’t	have	an	English	speaking	capital	that	would	be	the	equivalent	to	London…No,	although	I	think	you	can	see	here	at	WebSummit,	everyone	is	working	in	English,	even	the	French.Are	you	worried	about	the	UK	losing	access	to	the	EU’s	pool	of	talent?LSE Business Review: Julian David: ‘We need to get the data issue right in the Brexit negotiations’ Page 3 of 5		Date originally posted: 2017-11-23Permalink: http://blogs.lse.ac.uk/businessreview/2017/11/23/julian-david-we-need-to-get-the-data-issue-right-in-the-brexit-negotiations/Blog homepage: http://blogs.lse.ac.uk/businessreview/Yes,	and	that’s	quite	a	broad	problem.	If	you	look	at	our	research	and	development	places,	if	you	look	atuniversities,	the	whole	science	space,	how	many	times	do	you	see	European	talent	in	leading	roles,	andthroughout	the	technology	scene,	you	see	it	very	much	at	start-ups.	So	many	Europeans	either	moved	theirbusiness	to	London	or	started	their	business	somewhere	in	the	UK	because	of	the	advantages	that	they	see,	andthe	fact	that	they	don’t	have	to	worry	about	visas,	about	family	members	coming	to	visit,	much	of	that	stuff.	Well,all	of	a	sudden	they	do.	We	used	to	say	EU	skills	are	welcome	here,	EU	people	should	stay	here	and	contributehere.	And	tone	is	very	important	here.	One	of	the	most	disturbing	things	is	the	tone	of	the	conversation	that	washappening	a	year	ago	post-referendum.	It’s	so	important.	You	want	to	be	global,	Britain?	You’ve	got	to	behavelike	it.	And	that	involves	welcoming	the	best	talent	from	around	the	world.Universities	are	worried	about	that	too.	If	students	don’t	choose	the	UK	anymore,	and	you	don’t	retainthem	here,	you	don’t	allow	them	to	work,	then	they’ll	leave…Yes.	We’ve	always	thought	that	including	student	numbers	in	immigration	numbers	is	not	right.	Now	there	isn’tthe	problem	that	the	government	said.	The	students	aren’t	coming	here	in	disguise	and	staying	as	illegalimmigrants.	But	what	they	can	do	is	they	come	here,	bring	skills,	develop	those	skills,	build	the	university	sectorin	the	UK,	start	to	team	up	with	other	people,	UK	people,	and	build	businesses	in	the	UK,	or	contribute	to	them.Look	at	Graphene.	Who	are	the	people	who	had	the	breakthrough	in	that?	It	was	incomers	to	the	UK.	And	wemust	insure	we	get	those.	The	best	from	all	around	the	world,	not	just	Europe,	and	we	certainly	mustn’t	make	itdifficult	for	the	Europeans.Can	the	government	compensate	by	investing	in	technical	education	for	UK	students?Yes,	there	are	opportunities.	If	you	are	able	to	have	a	smarter,	more	agile	approach	to	things	in	the	UK,	maybeeven	taking	positions	that	the	EU	is	unable	to	take	or	takes	a	long	time	to	take,	then	you	can	see	someadvantages.	So,	can	the	UK	do	something	about	it?	Yes	it	can,	but	it	would	require	a	different	approach	toinvestment,	R&D,	increase	our	R&D	percentage	by	both	the	government	and	the	private	sector.	We’re	behindother	countries	in	this,	or	best	practices	in	other	countries	in	this.	Skills	and	tech	education.	It’s	taking	a	long	timefor	us	to	actually	develop	a	proper	tech	education	to	build	the	proper	skill	base	in	the	UK,	and	of	course	that	takesa	long	time	to	come	through.	You’re	not	going	to	solve	the	problem	in	2019	by	starting	some	computer	coursesnow.Is	it	possible	for	the	UK	to	thrive	without	a	free	trade	agreement	with	the	EU?We	think	it’s	really	hard.	Firstly	because	getting	these	kinds	of	agreement	services-based,	remember	howsignificant	the	services	side	of	our	industry	is,	with	other	countries,	is	not	an	easy	thing.	That’s	going	to	take	time,it	will	involve	a	give-and-take	and	a	willing	partner.	That	willing	partner,	all	of	them	have	said	“we’re	interested,but	we	want	to	see	what	your	agreement	with	the	EU	is,	first”.	And	like	what	Wilbur	Roth	said,	if	you	don’t	havepassporting,	a	lot	of	the	US	financial	institutions	are	going	to	be	concerned	about	investing	in	the	UK.	It’s	what	hesaid	this	week.	So,	that’s	the	first	issue	for	us.	The	second	issue	is	just	the	number	game.	How	do	you	replace	46per	cent	of	your	trade	in	one	go?	For	us,	although	some	parts	of	our	industry,	world	trade,	very	small	tariffs,	itcan’t	be	accommodated.	The	pound	has	already	gone	down	15	per	cent,	so	some	people	say,	that’s	really	notaddressing	the	point	of	regulation,	services	agreements	and	recognition	of	those	things.	And	those	are	the	reallyimportant	things.	So	we	think	not	having	a	deal	will	be	a	bad	thing	for	the	tech	industry.♣♣♣This	Q&A	is	part	of	a	series	of	interviews	during	the	Web	Summit	conference	in	Lisbon,	6-9	November	2017.	The	conversation	was	edited	for	clarity	and	brevity.	The	post	gives	the	views	of	the	interviewee,	not	the	position	of	LSE	Business	Review	or	of	the	LondonSchool	of	Economics	and	Political	Science.Featured	image	credit:	Courtesy	of	TechUK.	Not	under	a	Creative	Commons	licence.	All	rights	reserved.When	you	leave	a	comment,	you’re	agreeing	to	our	Comment	Policy.		LSE Business Review: Julian David: ‘We need to get the data issue right in the Brexit negotiations’ Page 4 of 5		Date originally posted: 2017-11-23Permalink: http://blogs.lse.ac.uk/businessreview/2017/11/23/julian-david-we-need-to-get-the-data-issue-right-in-the-brexit-negotiations/Blog homepage: http://blogs.lse.ac.uk/businessreview/	LSE Business Review: Julian David: ‘We need to get the data issue right in the Brexit negotiations’ Page 5 of 5		Date originally posted: 2017-11-23Permalink: http://blogs.lse.ac.uk/businessreview/2017/11/23/julian-david-we-need-to-get-the-data-issue-right-in-the-brexit-negotiations/Blog homepage: http://blogs.lse.ac.uk/businessreview/

Julian David: 'We need to get the data issue right in the Brexit negotiations'

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