MPs warn of data adequacy hole in no-deal Brexit

The House of Commons’ Exiting the European Union Committee has warned that leaving the EU without a deal would disrupt supply chains and data sharing.

A no-deal scenario would require new IT systems, new staff, consultancy fees and legal fees, the committee warned. “There is  a very long list of expenses related to no deal. Some of them are issues the companies themselves had not quite anticipated would be costs,” said the committee in its report Consequences of “No Deal” for UK business.

In the report, MPs highlighted concerns over cross-border data flows, which are fundamental to UK research and innovation, such as clinical trials. “In the event of a no deal, the UK would have no data adequacy decision from the EU,” said the report. “As a third country, there are a number of means to legitimise the flow of data, however the committee heard that these are bureaucratic and expensive. With limited regulatory support for academics and researchers, they are hesitant to devote resources to a process that, in the event of a deal, would not be necessary.”

Although the UK is looking for an adequacy agreement with the EU for transferring data, Giles Derrington, associate director of policy for TechUK, who gave evidence to the committee, warned that an adequacy decision takes time, and the fastest-ever adequacy decision took 18 months.

There are also indications that such a process for the UK and EU could take even longer, “by a factor of years”, the report warned. In the event of leaving without a deal, the report said there would be “a clear gap” between leaving and an adequacy decision. “There are already indications that EU companies are not contracting with UK entities due to uncertainty around future arrangements,” it noted.

Derrington pointed out that venture capital investment in the UK had fallen by about 58% in the first quarter of 2019 because of “Brexit uncertainty”. He warned that the fall in investment would have a disproportionate effect on new and innovative startups and said the UK’s position as the clear front-runner destination for venture capital investment in tech firms – an area seen as a future growth sector – would be jeopardised by a no-deal exit.

Commenting on the report, Derrington added: “As TechUK made clear in our evidence to the committee, the impact of failing to reach agreement on issues such as the free flow of personal data is a critical risk not just to the UK tech sector, but to every business in the UK. While we are confident that the UK can continue to be a great home for tech, a no-deal Brexit puts at risk our status as the obvious choice of destination for tech investment.”