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Brexit: what happens next?


Article Type: Feature          Published: 07-2016         Views: 1665      

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In the aftermath of the recent EU referendum, we find ourselves in the midst of a historic moment for the UK, with plenty of uncertainty in the air. So what does leaving the European Union mean for the cloud/data centre sector? Cloud Hosting magazine gathers opinion from across the industry

Jon Leppard, director at Future Facilities, has commented on the potential effects on the data centre industry: "Britain has decided to leave the EU, and this brings uncertainty in the short term. The data centre industry is at its core a bricks-and-mortar industry that has a long term vision for the decisions it makes. It is therefore likely to see some increased caution from the industry as it waits to see how the Brexit evolves. This caution is likely to come in the form of increased use of colo and shorter term projects instead of going for the new build in the months to come until the outlook is more clear. That said, the general trend of the industry is moving towards colo, and perhaps Brexit is simply going to be a catalyst for the adoption of this model. Right now, some see this as an opportunity, and others a risk - we need a bit more time to see who is right."

WITHER LONDON?
Some have suggested a mass exodus of large financial and other institutions from the capital as those businesses re-assess the benefits of being headquartered in London.

"Obviously, we don't yet know the terms and conditions of a Brexit, so it is impossible to intelligently predict what will happen. The timeline for many of these changes is also unclear, since the terms of the exit will likely take years to hammer out", said Aditya Kishore of Data Centre Dynamics. "Certainly London's entire financial sector will not decamp overnight, but it is probably realistic to expect that a considerable percentage of financial activity currently in London will migrate onshore, to destinations such as Paris and Frankfurt."

Data residency issues might also add impetus to this shift, adds Kishore: "Since the Safe Harbour ruling in October 2015, we have been expecting more storage and processing of data to move into the EU. This dynamic initially favoured new investment in London, but if it is no longer part of the EU, it may result in data transferring out of London, rather than into it. And while the financial sector is not the only industry that supports London's data centres, other industry verticals are likely to be affected similarly. At least some percentage of the large European companies that are currently headquartered in London (100 of the 500 largest European corporations) will also move some percentage of their data requirements back to the continent. There probably will be some reverse flow from Europe; i.e., British data that is stored in Europe today will return to Britain. However, this is likely to be eclipsed by the flow into Europe over time."

Certainly the Brexit vote has not deterred some of the world's biggest operators from reiterating their commitment to the UK: Amazon Web Services (AWS) has said the decision to leave the EU will not impact its decision to open data centres here. "In light of the Brexit vote, I just wanted to reassure our customers that we see the UK as a fast innovator, we see the UK has a huge talent pool, and as a fast adopter of technology trends," AWS UK manager Gavin Jackson told the 5,000-strong audience at Amazon's AWS Summit in London at the start of July. "Our job at AWS is to help you innovate through technology. So, we as AWS will continue to be an inward investor into the UK, and yes, we will continue on our path to launching a UK region at the end of this year or the beginning of next year. Our message to everybody in this room is to keep calm and keep innovating in the UK with cloud and AWS."

STEADY AS SHE GOES
The 'keep calm' message seems to resonate too with many UK data centre and cloud operators. "So far very little has changed for us as a business and is unlikely to for some time. Clients haven't been rushing for the door as many still value the services that Aegis Data can provide," says Greg McCulloch, CEO of Aegis Data. "London is still going to be a central hub for financial and tech investments, if not directly to and from the EU then for other countries. Online companies require sturdy, secure and reliable data centre providers to ensure they are kept up and running. With the drop in the pound, many UK businesses are taking necessary financial steps to ensure they mitigate some of the fallout. This low rate however brings benefits from overseas companies looking to develop a UK-based hub. Whilst there will be a certain amount of flight from UK based data centres to European alternatives, especially for larger data centre providers, the small to medium-sized alternatives can weather the storm by providing services to UK companies coming back from the EU and other global companies settling in the UK."

Indeed some US companies will be seeing Brexit as an opportunity, as the UK is assumed to favour light-touch regulation in comparison with the EU. But there are caveats.

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