In November 2017, the House of Commons Committee on Exiting the European Union (the Committee) published impact assessment reports of Brexit on various UK business sectors. The Report on the Technology (ICT) Sector (the Report) is a mix of qualitative and quantitative analysis. For each business sector, the Report includes: (i) a description of the sector; (ii) the current EU regulatory regime in which the sector operates; and (iii) an explanation of the frameworks governing how trade is facilitated between countries in the sector. Information provided by the government to the Committee about specific sector views has been withheld by the Committee.
The UK digital sector is vast. It covers digital goods, digital services and digitally enabled transactions of goods and services. It includes the following services and products: (i) audio-visual; (ii) e-commerce; (iii) telecommunications; (iv) data; (v) emerging industries, such as artificial intelligence; (vi) FinTech (dealt with in a separate report); (vii) the Internet of Things; and (viii) cybersecurity. Though London is a prominent hub, digital companies are spread across the UK. Several other cities have highly ranked digital clusters.
The Report highlights:
- the extent of the UK’s investment in the digital sector;
- how tech companies are investing in the UK since the Brexit referendum; and
- information about the value added by the ICT industry, including its contribution to national economy statistics, employment, national balance of trade and international trade.
The current EU regulatory regime and data protection
The current digital sector regulatory framework is linked to the EU’s Digital Single Market (the DSM). The DSM is an EU Commission strategy to boost e-commerce across the EU. It also hopes to modernize regulations and promote the digital economy in the EU. Pan-EU initiatives on free flow of data, cybersecurity, e-Privacy, ICT standards and intellectual property are highlighted in the Report.
Data protection is highlighted as a key enabler of the DSM. According to the Report, data protection is “not just for the digital sector, but also underpinning the whole economy”. The Report states the introduction of the EU’s General Data Protection Regulation will set the new EU standard for data protection. This massive regulatory change will be reflected in the UK’s transition from the Data Protection Act 1998 to a new Data Protection Act (expected to be passed in 2018). This new Act will apply stronger sanctions for malpractice and higher standards of protection for personal data.
An explanation and status update is also given on:
- the ePrivacy Directive;
- proposed regulation data flows and potential requirements in the area of data localisation;
- the E-commerce Directive; and
- the Network and Information Security Directive (covered by this blog previously).
The Report stresses that existing international trading arrangements do not necessarily represent the options the UK government is considering for the future economic relationship between the UK and the EU. Other trading arrangements, such as World Trade Organization rules, or bilateral and multilateral treaties are specifically mentioned. As the digital sector is dynamic and fast moving, many pre-existing arrangements do not necessarily cover all aspects of digital trade.
Through the Report, the Committee aims to frame the benefits of Brexit for the digital economy. Follow-through on strategy and harmonisation of UK and EU regulation will be an important step in tackling uncertainty in this area.