Brexit is posing numerous challenges for UK markets, and software is not immune.

From GDPR compliance, to recognition of professional qualifications, to cross-border provision of services, software vendors have their work cut out to navigate the new environment.

Brexit Latest

As a result of the final Trade and Cooperation Agreement (TCA) between the UK and the EU, the bureaucratic burden, the longer delays, and the lack of preparation will affect those export/import businesses that have previously relied on the EU common market.

Despite the efforts of policy groups and numerous stakeholders, the TCA has very few provisions for services and the negotiations in this area are expected to continue into the future, with the option for smaller deals in specific areas.

There has been a huge amount of media coverage on the impact on trade, with the press focusing on the non-tariff barriers to trade that have emerged after the UK’s decision to abandon the common market.

While the TCA allows for tariff-free and zero-quota access to EU markets, that’s no direct substitute for being part of the common market, and there have already been shortages and problems across supply lines on both sides of the Channel.

The UK has a strong presence in the technology sector and its software companies are key players in the European market. UK software market revenue was $14.6 billion in constant prices in the first half of 2020, second only to Germany’s $15.7 billion, according to IDC’s Semi-Annual Software Tracker (as of January 2021).

In some key application areas such as customer relationship management (CRM), the UK is the largest European market and Brexit is bound to have a direct impact.

Effect of Brexit on the Software Industry

For the software market, there are several issues relating to Brexit: from GDPR compliance, to the regulation of professional services, to how software as a service (SaaS) will be regulated post-Brexit, to the recognition of professional qualifications, access to talent, and the time limits on visa-free travel. Little wonder that the UK software market is facing some major challenges.

Brexit and GDPR

UK businesses need to review the personal data they hold and make sure their practices comply with both the EU’s GDPR and the successive UK regulations when it comes to sharing and storing that data, especially for customers with EEA citizenship. It remains to be seen whether the European Commission will grant “adequacy” to the UK in terms of data legislation.

Lack of adequacy will make the UK an “unsafe third country” for data flows and would jeopardise data transfers between the two jurisdictions and may force EU-based SaaS providers to cease these flows. For all intents and purposes, any UK-based SaaS provider that has EEA customers will still be required to comply with GDPR.

Impact of Professional Qualifications

The same challenges and uncertainties exist with professional qualifications related to software design and delivery, access to talent and hiring from the EU, the data flows between UK- and EU-based subsidiaries, and the capacity of UK and EU datacentres to hold data from opposite jurisdictions.

For some companies, setting up an EU-based subsidiary and the greater reliance on EU passport holders may be the only way to offer support and bypass the hurdles to professional qualifications and visa-free travel for business purposes.

Effects on Supply Chains

The non-tariff barriers to trade that emerged on January 1, 2021, have been challenging for smaller firms, especially with red-tape and rules of origin, which can significantly disrupt supply chains. On the one hand, this disruption is a great use case for the deployment of more automation and more software-based solutions. On the other hand, many smaller companies are paying a heavy economic price and may have to reconsider their business model and their efforts to access the EU market.

Where Does This Leave the Software Market?

The UK will continue to be a major software market, as it has the volume, the innovation, and the experience to stay at the forefront of the European market. In many cases new software tools that manage supply chains and increase automation will be in strong demand in the UK and the EU for anyone engaging in bilateral commercial flows. That could be an exciting opportunity for many vendors.

At the same time, the regulatory outlook remains opaque and SaaS providers will have to review their data policies, data flows, terms of existing contracts, and how they support existing or prospective customers on the continent. SMEs already hit by COVID-19 will see their export options limited by the TCA and the barriers it has put in place, forcing them to rethink their software investments and their overall plans.

The lack of preparation and the uncertainty are forcing this once robust and dynamic source of software spending into a period of introspection. This in turn could negatively affect the overall performance of key software markets such as financial applications, HCM systems, and SCM solutions.


If you want to learn more about this topic, head over to and drop your details in the form on the top right.

Spread the love