Or, why after much reading, questioning, deliberation, and discussion we are not actually doing much preparation.
To both inform our customers and help other digital businesses in our shoes, the following is the work we have done to come up with our current position regarding No Deal Brexit preparations. Or the actual lack thereof.
What does a No Deal Brexit mean for a digital business?
Our first quest is to better understand what a No Deal Brexit means for our business. Firstly, a little background.
Having read the 500+ pages of the (but now deemed to have failed) Withdrawal Agreement – ‘aka Theresa May’s deal’; from a digital business perspective not much has changed vis-a-vis being in the EU. It was acceptable as it covered the key elements and maintained the status quo.
Ideally, our business needs to have some solid foundations to make sound and informed decisions. The premise for this exercise is to put these foundations down, so as to make the best decision possible with the information available.
With time limited only so much effort can go into understanding the impacts of a No-Deal. Let alone any investment to prepare. However, when reviewing the impacts of a No-Deal, the status quo is upset. Change is coming.
Therefore, I set about digging around the available advice on what to do if we had a No-Deal scenario. This included a detailed correspondence with a now ex-minister of State Margot James, courtesy of my local MP George Hollingbery.
Some of the advice out there for digital business is not relevant as it is focused on those organisations shipping physical goods. For example, a digital business does not need an export customs number. Plus we already have customers across the globe and leaving the EU will not change this scenario.
Ironically, doing ‘digital business’ in the EU is more about soft barriers to entry and not customs checks. This is what the Single Digital market was set to unlock.
What then does leaving the EU mean for a digital business?
It could be painful. All depends. The key areas of impact are:
- Loss of trademark protection across the EU – so our trademarks will need to be registered in the EU.
- The withdrawal agreement provided ongoing trademark and IP protection.
- Our action: None – as the cost is prohibitive to undertake prior to Brexit. The approach is to wait and see.
- UK ICO needs to confirm equivalence post-Brexit. This cannot be done until the UK leaves. How long this will take is unknown. Therefore the assumption is that the UK ICO is not considered to be equivalent post-Brexit. UK government advice is to shift your processing to an EU home.
- Ironically, this situation was settled in the withdrawal agreement as the ICO was certified to be equivalent (well, at least until 2021).
- Our Action: None. The approach is to wait and see as any deal could see this issue disappear. Plus, the funds to hand to set up a new entity just in case could be a huge waste of capital.
- We have EU customers but the processing of personal data does have certain obligations due to GDPR. Which we need to continue to adhere to.
- The UK ICO is no longer involved in EU data protection regulatory discussions, which is a shame as we have a good relationship with our local ICO.
- Our Action: None. As we are already GDPR compliant.
- We will, however, need to find another EU ICO equivalent to talk to soon though as Consentua especially helps deliver GDPR compliance.
- We may need to set up an EU-registered entity if we are a digital data processor.
- The good news for KnowNow is our focus is on selling software and not processing personal data.
- Our Action: None… For now.
- On the basis that an EU-registered entity may not be required.
- The opportunity cost versus risk mitigation versus benefit does not currently add up.
- If you are involved in EU-funded projects (H2020) post 2021 this funding is not guaranteed.
- We have one project – CRUNCH– due to last till 2022. This is a multi-country project that fits with our strategy and ethos. Ongoing participation and the ability to stay involved could be under threat.
- Our Action: None as the majority of our deliverables are in the 2020 to 2021 time period so will be funded irrespective.
- Exploitation and follow-up may not happen even if the project is completed successfully. But…
- We have always assumed this was a standalone project, which may have a positive outcome (hence it is only 70% funded by public subsidy).
- Overall the involvement to date has been positive and the outcomes will have an impact we can take advantage of.
- We are leaving before the Digital Single Market really arrives.
- The world of digital is mono-linguistic in the EU. English rules the sys admins but each country protects and covets its own language and culture. This needs to be protected and nurtured.
- Our Action: luckily our products are multi-lingual. Always have been and always will be.
What have we done then?
If you are one of our customers then you will have seen a small change in your terms of use for our software with the insertion of a standard contractual clause.
Worst Case?
We have to scramble quickly to instantiate an EU-based office. Luckily for us, an EU-based partner has agreed to undertake this on our behalf and ‘own’ the customers based in the EU. However, this exercise will need to be paid for.
The impact on our bottom line here is we have a pot of funds on ice for this potential eventuality. Plus, we would need more €’s to fund this new entity once up and running. This will have a continuing drag on our profitability too. The overall desire in the short term is to avoid any unnecessary expense unless it is essential.
Outlook
Being pragmatic, especially where we need decisions and surety of outcome from the UK Government where none is currently available, we have to assume the worst. Yet based on the one slippage already from March to October, the question has to be….”Will we leave with no deal?” I think not, but that is not important.
What is key is that we can meet our contractual obligations and the expectations we have set for our customers. So, irrespective, we need to have a position on what to do in the event of a no-deal.
Added to the reality that any investment in mitigation is likely to be wasted or even worse ineffectual as it could be the wrong response. Therefore, doing not a lot today seems to balance risk versus reward. We know what to do if certain events occur. Just not sure if or when.
In Conclusion
Our action: Keep an eye on proceedings. Keep an open mind. Be reactive when facts are known.
I hope this helps explain what we are (not) doing and why.
Thanks for reading, Chris.