Brexit: A Disaster in Waiting or Y2K All Over?
As the UK's parliament dallies daily over whether or how to sever political and trade ties with the European Union, the uncertainty has put doing business with UK-based companies at some risk. There's evidence too that investment by companies, foreign or British, has been delayed. However it eventually falls, the impact of Brexit will be felt in terms of tariffs, visas, and potentially on the cultural and earnings power of the UK's creative industries.
D-day for exit long been considered March 29, but even that is up for grabs with a short or more lengthy delay increasingly likely. In the meantime, UK-based streaming media businesses, have had time to take stock.
Tariffs: Impact Minimal
Deal or no deal, import and export duties are likely to change, but an industry committed to software means software producers are minimally affected by a no-deal scenario.
"Software pretty much sells the world over without tariffs, albeit with a few notable exceptions," says Jonathan Morgan, CEO, Object Matrix, maker of cloud and hybrid object-based storage.
The Cardiff-based company also sells the hardware servers to go with its asset management software. On that side of things, the company says it has taken precautionary measures to ensure that it can get its hardware builds made inside and outside of the EU.
"The whole Brexit situation has already devalued the GBP, making our goods less expensive the world over," Morgan says.
In terms of risk mitigation, London-based social streaming and webcasting specialist Groovy Gecko has already deployed encoding equipment to two sites in Europe, "so traveling will be easy and quick without any potential customs," says Craig Moehl, CEO. "In addition, we anticipate that more events will be broadcast via LiveU or satellite to our UK hub if there are any issues. We are duplicating and housing essential equipment outside of the UK. This enhances our scale and disaster recovery capabilities so it's good practice."
Moehl doesn't expect Brexit's impact to be great unless budgets are affected. "If the pound crashes, we will be a lot cheaper than Europe and gain more business," he says. "In addition, we provide our clients with the option to transact with a EU-registered company should they prefer."
Sarah Platt, director and co-founder London-based live streaming producer Kinura, says "It feels like no-one really knows what the long-term impact will be. It's the uncertainty that is the worst thing. One of the ironies is that we've produced livestreams of quite a few Brexit debates, so on that side of things you could say it's good for business, but actually we feel that no deal will negatively affect many of the global businesses we deal with and make the UK worse off."
Visa Change: Red Tape
The visa issue is more problematic regardless of a deal or a hard Brexit scenario. In the case of a deal, free movement ends at midnight on 31 December 2020, after which a new visa system will come into force. In the event of no deal and until 31 December 2020, EU citizens can enter the UK to live and work for up to 90 days without a visa. After 90 days they can apply for European Temporary Permission (probably costing between £250 - £500) to live and work which, will last for three years. Thereafter they will need to apply for the skilled workers visa. The costs of a five-year skilled work visa could be as high as £9,000 (US $11,900). Either way, red tape may be a particular problem for small companies that don't have the ability to scale up their human resources.
Impact will be most keenly felt by those UK based companies that employ a significant number of people from the EU or rely on being able to ramp up quickly with freelance talent from the EU. Neither of these scenarios is as likely to impact the streaming media production sector as much as it will do for adjacent creative industries such as animation and visual effects postproduction, where up to a third of the UK's 6,000 employees are from member states.
"Obviously, with Brexit, the rules on immigration will change," says Morgan. "In theory, some politicians say that this will mean we can get the best talent from anywhere, but in practice we just don't know yet how that is going to work or how quickly the changes will come about.
"We take the view that things are unlikely to fundamentally change in the short term, and that good quality software developers will always be able to work in the UK. When we travel abroad to the EU, I can already imagine standing in the 'other passports' line, grumbling about the stupidity of it all … but in reality, that won't change things too much for us as a company."
For businesses like Kinura's tied up in the world of media and marketing, a lot of the impact will be around legal overhead for things like EU data.
"We've already had to spend so much time on updating processes and documentation because of GDPR," Platt reports. "There are concerns about added bureaucracy of employing staff from the EU, but to any sensible company that isn't going to be the greatest concern. We have lots of crew on our roster who are EU nationals and they don't seem to concerned about applying for 'settled status.' Everyone is just waiting to find out the final decision."
Kinura produced a discussion exploring the challenges Brexit is bringing to bear on companies recruiting efforts for Workable.
Creative Industries: Dented
Wider harm to the UK's creative industries is perhaps the more significant cause for concern over the long term.
"Impacts to the broader ecosystem could be felt," says Moehl. "If there are price increases (due to tariffs and duties) to the broadcast, AV, and production industries then we may feel that impact. However, innovations to provide substitute workflows where possible and moving production functionality (such as graphics generation and overlays) will mitigate some of that risk in the medium term."
The UK creative industries generate more than £100 billion (US $132 billion) a year to the UK economy and 3.12 million jobs, according to the Creative Industries Council, a joint forum between the creative and digital industries (including TV, computer games, music, and publishing) and government. It accounted for £27 billion (US $35.7 billion) of export services in 2016, the latest available year of data or 11% of all UK service exports.
"The success of the creative industries should never be taken for granted by the government," warns Morgan. "Other governments have targeted that and will try and strike while the UK is in transition. The UK needs to ensure that it prioritises its successful industries and Creatives should be top of that list."
The UK, specifically the area around London, is the most significant hub in the EU for linear and on-demand services targeting other countries. Around 500 pan-European channels currently use an Ofcom-endorsed licence, but this is under threat post-Brexit when such licenses might become invalid.
Discovery was among the first to announce plans to shut its UK playout hub. AMC and other networks like Turner Broadcasting are also mulling overseas options in Dublin, Madrid, Warsaw, or Amsterdam for an EU-wide licence, which also means physical relocation of some staff and services like satellite uplinks.
"If there's a no-deal scenario and creative companies ship out, then we could definitely lose business with some of the creative agencies we work for," says Platt. "You can see how there might be a knock-on effect for smaller production or tech companies if there are freezes on hiring or lengthy contract negotiations with EU partners.
Like many UK citizens—and don't forget 48% did vote to remain with our friends in the EU –Platt finds it "pretty depressing" that people with talent or the right skills "may have a harder time working in the UK because of changes in the laws on free movement.
"We are all having to push to remain positive in this climate. The trouble is there are so many scenarios, who has time to wrangle all of that in between delivering projects and day-to-day business?"