It’s hard to believe that the Brexit referendum was way back in 2016 and yet it was only on Christmas Eve, four years later, that some kind of a deal was finalised. We can now start to see what the impact will be on the data centre sector.
In general terms, there are still a lot of unanswered questions around things such as cross-border trading arrangements and carbon pricing; data sovereignty and data transfer; labour shortages and the free movement of workers for construction and operation; and the supply chain and import/export of goods specifically in relation to construction and maintenance projects. It’s a big subject, so in this article I have outlined just a few issues.
People
We need to look at this in light of the well-documented and continuing skills shortage in the UK. In simple terms, things will be trickier, more expensive and overall likely to have a negative impact on the availability of good people.
In fact, the Migration and Construction report, published by the Construction Industry Training Body, has warned that recruitment agencies believe the UK’s new, points-based immigration system will lead to a 40% decrease in the number of skilled construction workers coming to the UK.
For long-term, permanent staff, if workers arrived pre 31 December, they need to apply under the EU Settlement Scheme to remain living and working in the UK long term. Workers that arrive after that date have to apply under the new UK immigration rules. They would likely have to rely on skilled worker status, and this will include architects, engineers and quantity surveyors, as well as trades such as bricklayers or carpenters. However, it excludes roles such as general labourers and some plant operators.
An applicant will need to produce evidence of a job offer at the required skill level that also meets a new minimum salary threshold of at least £25,600, which may be problematic outside of London.
The business will likely need to sponsor them, for which they need a sponsor licence, and there are some hefty fees to pay — £9,500 per person to sponsor someone for five years — and a delay whilst the application is processed.
Product standards and certifications
We will continue to use the CE mark until the end of this year, so at the moment, we have largely mirrored the EU requirements. However, this will be replaced by a UK marking system for products to be used in the UK market and will require conformity assessment by a UK-recognised approved body.
It is hoped UK Conformity Assessed marking will align closely to the CE marking system, but we just don’t know. Over time, there is likely to be some divergence between the EU and the UK and manufacturers may then need to make separate products for the UK and EU markets.
Data and GDPR
The Christmas Eve Agreement kicked the can down the road.
While that outcome was expected, it is also disappointing. The Christmas Eve Agreement provides for interim provisions, so until 30 April 2021 (or 30 June if the provisions are extended), the UK is effectively deemed to be part of the EU for the purposes of transfers of personal data.
The UK has already granted adequacy status to the EU — and so personal data may be transferred from the UK to the EU without standard contractual clauses or binding corporate rules — but it is for the EU to decide whether the UK can afford adequate protection to personal data for EU subjects.
If they do not, it will be very disruptive for both EU and UK businesses, who will need to put in place appropriate safeguards to allow transfer of data from the EU to the UK which are likely to be costly and time-consuming.
The real challenge is time frames — businesses still do not know what they have to do, and four to six months may not be very long to do it.
Get involved
This is so important.
The Christmas Eve Agreement seeks to establish a myriad of councils, committees and working groups — it will be critical that a good cross-section of the UK data centre, telecoms and digital sectors are properly represented at these to ensure that the industry’s voice is heard.
If you get the opportunity, please consider stepping up. Conexus Law will.
Conclusion
The UK data centre sector has shown itself to be resilient against many challenges and I have no doubt that this will be the case with Brexit.
I think we have seen, and will continue to see, data centre operators responding to the requirements of their specific customer base. So, some operators will undergo rightsizing across their UK and EU portfolios as their customers decide where they should locate data, and which is the most benign tax environment for their business.
That rightsizing will see some operators build more in the UK and some focus more on the EU, depending upon their current portfolio. We shouldn’t let that process cloud our judgement on the data centre market fundamentals.
Once it has all settled down, the UK data centre market will remain very strong.
So, will Brexit have some long-lasting effects? Yes, certainly. Will it create a lot of short-term upheaval? Absolutely. Do I personally think it was the right thing to do? No. But here we are, and it is incumbent on data centre operators (like all businesses) to seize the opportunities that forging our own way in the world will bring.
One way to do that is to get involved and ensure proper representation of the industry as the new detailed rules of business are being created.
