The biggest challenge facing the UK data centre market is uncertainty. Presenting the findings of the TechUK paper, Silver Linings: The Implications of Brexit for the UK Data Centre Sector, at Data Centres North, TechUK associate director Emma Fryer highlighted the threats and opportunities posed by the UK’s decision to leave the European Union.
In its report, TechUK points out that the commercial London market is the second largest in the world and dominates the European market with 43% of the Tier 1 supply. However, the organisation says it is aware that technology lawyers have been temporarily advising its clients against a UK location, for operations dependent on cross border data flows into the rest of the EU, until there is greater clarity; some high value contracts have been redirected to Dublin, Frankfurt or Amsterdam.
The TechUK paper points out that there is a potential threat in relation to skills – the UK data centre sector cannot fill its current skills gap with domestic talent and the success of the UK data centre sector is “underpinned by its ability to attract the best skills from across Europe.” Many non-British EU nationals work in key roles within data centres, both technical and non-technical. Clarity is therefore required on the status of these individuals, how they will be protected and how the UK can continue to make use of their essential and specialist skills.
The report outlines these and other threats but adds that Brexit should be seen as a catalyst to “review, reconsider, renegotiate, revise and repurpose”; to reset the UK’s global competitive position and rethink priorities and partnerships. For example, Brexit offers the potential for some degree of freedom from existing regulatory or pricing constraints.
In response to Brexit, TechUK is outlining seven priorities for action:
1. Uncertainty: protect data flows, implement GDPR equivalent and prioritise single market access. Making intentions clear before acting is preferable: uncertainty is damaging.
2. Data flows / Data protection: Provide an urgent undertaking that UK data governance laws will be adequate for compliance with EU and global requirements so that UK operators and their global customers can continue to host, manage, process and transact EU and other national data in the UK.
3. Single Market: Provide an undertaking that access to the single market will be a priority in negotiations so that UK operators and their global customers can continue to export digital services to the EU without trade barriers or non-tariff barriers.
4. Skills: Provide an urgent undertaking that the UK will be open to free flow of skills and that non British EU employees will be protected. Redesign existing immigration policy and replace it with a skills based migration policy.
5. Energy costs: Mitigate energy prices by reducing non-commodity energy costs; facilitate access to compensation for RO/FiTs/CfDs. The UK needs a simpler and more consistent way to identify energy intensive businesses. Current arrangements are complicated, targeted at mitigating industrial decline rather than protecting growth, and are inadequate.
6. Inward investment: Make a stronger case to support inward investment in the sector. Be explicit that the sector is valued and welcome. Upgrade incentives and target them more effectively. Smooth the runway so that investors are not beset by obstacles.
7. Environmental compliance: Retain environmental targets and standards but review energy and carbon taxes.