brexit-1462470589PAaBritain woke up to a bit of a shock last Friday morning. As you have no doubt heard by now, the British people defied expectations and narrowly voted to leave the European Union. The event known as “Brexit” sent a shock wave through financial markets and caused the pound to drop sharply and then oscillate as the market readjusted. Over the weekend, portions of the British financial industry were already reportedly enacting contingency plans to move some operations out of Britain and Moody’s downgraded the British credit outlook to negative.

Boris Johnson, who led the Vote Leave campaign, went on national television shortly after the result was announce to make a very strange victory speech. Some of it seemed positively pro-Europe; Johnson claimed the UK would be no less united and no less European. He also claimed that this was not an isolationist outcome and that Britain would continue to take a leading role in at least some areas of European policy. As my 9 year old son would say, it must be opposite day. More substantively, Johnson agreed with outgoing Prime Minister, David Cameron, that there was no need to invoke Article 50, the clause in the Lisbon treaty that sets out the exit mechanism for member states.

By far the strangest aspect of the speech for me, however, was Johnson’s apparent lack of enthusiasm in the face of his victory. As this tweet pointed out, he seemed at the very least to be as shocked as the rest of us and as some have suggested, almost looks like he’s regretting his part in the mess.

As Friday turned to Saturday, the mood among at least some people who voted to leave began to change. Nigel Farrage, another leading light in the Vote Leave campaign, and founding leader of the UK independence party (UKIP) admitted that at least one of the key promises of the leave campaign, that of an extra £350m a week in NHS spending, had been a mistake. Similar backpedaling on another key Brexit issue by pro-Leave MEP Daniel Hannan, that of free labor movement and immigration, followed. The twitter hastags #regrexit and #whathavewedone began trending on Saturday Morning.

Britain seems in a fairly odd place psychologically right now. The denial and shock are subsiding but many of my friends and colleagues are still angry. They’re frustrated by a political system that they feel allowed disingenuous appeals to populist fears. Some are angry at the electorate themselves, particularly those that voted to leave and now say they wish they hadn’t, because they didn’t think their vote mattered or they didn’t understand the consequences.  For some of us, the existence of #regexit hurts the most. We honestly thought we were smarter than that.

Update as of Thursday: Earlier in the week, European leaders were pushing for rapid invocation of Article 50 leading to a fast exit with no special deal. It seems, though that David Cameron is playing the only card he has by insisting that since he’s lost his mandate from the people, only his successor can take such a step. In the meantime, EU leaders continue to insist that Britain has to fully leave the EU before any talks on the shape of the relationship moving forward can begin. In a further blow to the UK position, a meeting of EU ministers took place yesterday, to which Britain was not invited. Having literally lost their seat at the table, the UK was told that it would not be allowed to pick and choose the benefits of the EU to which it wished to subscribe. Particularly with respect to the free movement of labor, one of the key issues of the referendum itself.

[access to the single market] “requires acceptance of all four EU freedoms – including freedom of movement. There can be no single market à la carte.”

-Donald Tusk, EU Council President

The rights, wrongs and recriminations over Brexit will continue to be debated. We don’t know if the UK government will invoke Article 50, although it looks like it may not, at least in the short term. We don’t know whether it will retain access to the common market, with or without signing up to free movement of labor. I’m sure there will be comments below. In the meantime, however, I want to take a step back and imagine we really did pull up the drawbridge completely and explore just two of the potential consequences.

The Knowledge Economy

My biggest concern for the future is what will happen to Britain’s knowledge based economy, or quaternary sector. The quaternary sector covers everything from universities and higher education to the pharmaceutical industry, computer software, technology start-ups and anything else that requires a person to use knowledge to create something new of value. If you’re a regular reader of this blog, there’s a good chance you’re in it. It doesn’t cover things like financial services, banks and medicine, they’re part of the service economy, or tertiary sector.

Britain is a leader in the knowledge economy. When British Chancellor of the Exchequer, George Osborne opened Elsevier’s new technology hub in London last year, CEO Ron Mobed, wrote a blog post about his reasoning for setting up shop here. Mobed was attracted to Britain’s position as a technology leader, with Mendeley being an obvious example of technology and scholarly communication innovation in Britain.

While London is often referred to as the tech capital of Europe, it’s not the only place that innovation happens in Britain. The country is littered with tech incubators and angel networks. Many of the entrepreneurs that I’ve met are from all over the UK (as well as Europe and the US, of course). Edinburgh is a great example. Edinburgh University’s E-Club, the Edinburgh Office for Research and InnovationTechCube, and Codebase are among the entities both publicly and privately funded that support entrepreneurship in Scotland.

Back in 2011, the Work Foundation, a non-profit think tank based at Lancaster University, stated that the knowledge economy was the fastest growing sector in the UK and that making use of a multi-national work force has been a key to its success.

…increasing flows of ideas, knowledge and goods from around the world have accelerated the transition towards a knowledge economy

-Source

For a practical example of why that’s the case, take what I’m doing right this moment. I’m writing this post from a hotel room in Cologne, having recently gotten off a plane from Edinburgh. I’m here because I have a meeting with one of my colleagues, a founder of German company Uber Research that is part of the Digital Science portfolio. I got into the EU citizen’s line and breezed through immigration with minimal delay, which is handy when you sometimes have a tight schedule. With our present relationship with the EU, we may as well be in London. At least one of the employees of the portfolio company I’m visiting is British, he lives here in Cologne and he doesn’t need a work visa. Modern businesses need to be both international and agile, the more bureaucratic obstacles that are in the way, the harder it becomes.

It’s not just about whether I can get on a plane or work across a multi-national business without worrying too much about borders, or even about making it easier to invest internationally. Knowledge and tech-based companies often employ people from all over the world. Due to the fact that Britain is physically located on the European continental shelf, many staff in British companies work in offices all over Europe, or move to Britain to work. If we lose access to that labor pool, or it becomes harder to access, that’s going to hurt Britain’s competitive edge in the world.

Research Funding and the Money Scrum

Biggest losers: EU funding allocated to UK universities over the last 10 years.
Biggest losers: EU funding allocated to UK universities over the last 10 years. Thanks to @UberResearch Click on it for a bigger version

There’s going to be a lot of talk about EU research funding over the coming weeks. Particularly, we’re going to hear a lot about Horizon 2020. One of the questions that we’re likely to hear is: What on earth is Horizon 2020? Simply put, it’s the name of the framework under which science and technology grants are allocated within Europe. It’s basically the brand name for the set of policies that define Europe’s science strategy. The big fear among academics in the UK is that they will be excluded from applying for grants, and therefore loose access to all EU science funding. It’s far too early to tell whether that’s going to happen. There are countries outside of the EU that do qualify for Horizon 2020 funding but in a twist that will start to sound familiar, access has historically been tied to, you guessed it, free movement of labor.

EU funding accounts for a significant amount of research money in Britain. Universities UK (UUK) have calculated it to be around £1.2bn per year. That’s a little higher than the number that Digital Science got of £968 million, but either way, that’s about a quarter of all money that is spent on research grants in the UK per year.

If that money were to suddenly evaporate, the consequences for the UK economy and for scholarly publishing in the UK would obviously be dire. The bright side is that if and when we stop paying our EU dues, the UK government will have an extra £13bn per year to play with. At least, that’s the idea. (That’s taking account of the rebate, for those who are counting). The UK happens to have been a significant net contributor to the EU, receiving back £4.5bn in the form of grants and other types of EU funding.

This may seem like a simple matter of re-routing the funds to the right places, which is no doubt what the British government will try to do. The problem is that everybody is going to want a piece of that pie. Before the end of the day on Friday, the Welsh first minister gave a speech calling for Westminster to ensure that Wales not lose a penny in development funds. Cornwall, who co-incidentally voted to leave, also made a similar request for support to replace EU money. Meanwhile, a petition to the UK government to honor the Vote Leave campaign’s implied promise to increase NHS funding by £350m a week didn’t quite go viral on facebook earlier in the week. As the coming months unfolds, I’ve no doubt that everybody who currently receives EU funds and a lot more people besides will be campaigning and lobbying for a slice of all this seemingly free money.

British academia is aware of the fact that it’s going to have to fight for its fair share. UUK have already said that its focus will be on securing and maintaining support for research as the funding pathways shift over the coming weeks and months. To be fair, even before the referendum, a group of 20 pro-Leave MPs, including Boris Johnson, Michael Gove and Priti Patel, pledged to maintain EU awarded grants, in a statement on the Vote Leave website, until 2020 or the expiration of the funding, whichever comes sooner. Given how the post referendum political situation is unfolding so far, however, there’s cause to fear that such pledges may not be kept.

The final consequences of the Brexit vote remain to be seen. The precise nature of Britain’s relationship with the EU moving forward is deeply unclear. There’s an obvious need to maintain trade links with our European partners, but how we’re going to do that and under what terms remains a mystery. What we do know is that no country has previously negotiated access to the European common market without signing up to the free movement of labor. (Canada’s deal hasn’t yet been implemented and doesn’t include services, which make up 80% of the UK economy.) It’s possible that whatever deal we negotiate may have a bit of a worst of both worlds feel about it as Britain is forced to abide by EU regulations in order to trade with the EU without having any say in what goes into them.

For those of us in the tech sector and in scholarly publishing, there are specific concerns. Our industry mirrors academia in that it is more dependent than most on the global talent pool as well as international partnerships and investments. Perhaps more importantly, we should be concerned about what this means for our customers in academia in the UK. With a substantial portion of their funding on the line, we must be sure to remain agile and attentive to potential shifts in the market. On the other hand, we must also stand with those that we support and try our best to help them protect their interests.

Over the coming weeks, those of us who care about the future of science and academia will have to continue to call for the UK government to continue to fund research at the present levels at the very least, or risk it being lost in the scrum.

Phill Jones

Phill Jones

Phill Jones is Director of Publisher Outreach for Digital Science. His job is a complex and nebulous thing with seemingly ever evolving responsibilities. These days, he spends quite a lot of his time working in the Consultancy, drawing on Digital Science's data and expertise to support decision making for publishers, institutions, funders and governments.

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Discussion

37 Thoughts on "Brexit: Risks to the Knowledge Economy and the Money Scrum"

Phill

Many thanks for this excellent summary: immediate personal disclosure that I helped run parts of the data operation for the Remain campaign in Cambridge, and am deeply saddened by the outcome.

At the same time, the Brexit vote did reveal a (to my mind) profoundly worrying schism between the British research and university communities, and the majority of their fellow-citizens, something (which as the comment pages on The Times Higher website make clear) has if anything been exacerbated by the outcome. It’s also worth mentioning that, whilst perhaps 90% of the British scientific research community supported Remain, there were certainly social scientists (especially in politics, constitutional law and history) who did not, and indeed UKIP itself was originally founded by an LSE history professor (Alan Sked). There is a de haut en bas reaction to the Leave vote from too many people on the Remain side which has not been very edifying, and can only confirm the prejudices of the former.

Of the many divisions within British society which the Leave vote has illumined, one of the most resonant for readers of the Scholarly Kitchen has to be (in addition to the age, class, educational and gender resonances of the vote) the very significant digital divide. The annual Ofcom report on national digital access makes clear that there are major parts of the UK with, at best, partial digital penetration, and I am willing to bet that an overlay of the maps of highest Leave support with lowest digital skills or access would produce a striking correlation. To take one specific example, in Pembrokeshire in West Wales (population c125 000), where Ofcom estimated in 2015 that up to 25% of the adult population have never ever been online, Leave support ran at a well-above average 57%.

There are huge issues to be thought through for all of us in the months and years to come, as we seek to preserve the strength and global importance of the British research and university communities. Nonetheless, we have to be very careful indeed lest we collectively reinforce an impression of (still) inhabiting an ivory tower, albeit one with superfast broadband. The truly sad public disdain for expertise the result threw up only shows how exposed we are already.

Thanks Richard for that insightful point of view.

You’re absolutely right that there is both a digital and educational divide in the UK. I don’t know if it’s getting larger or not but it’s not new. Having grown up in a part of the country where the expectation that I would go to university was low and that coincidentally voted very strongly to leave. I have been very familiar with anti-intellectualism since well before I ever heard the term.

What I feel may be different is that some UK politicians have been more openly playing on those fears in a disingenuous way. Michael Gove, for example, famous said that the UK public are tired of hearing from experts. I didn’t go into it in my post, but the parallels with the US republican strategy are clear. The problem with using this sort of populist approach is that it has a tendency to get away from you, and we’re seeing the consequences of that now.

I’m not sure what those of us in academia and the knowledge sector can do about this and I’d be interested to hear your views.

Dear Phill

I don’t pretend for one second to have an immediate solution, or solutions, but I do think that both British publishing and the British academy (lower case) ought to pause and think about what the result means. For a much more sophisticated and powerful extrapolation of what I have only been trying to hint at, I would refer SK readers to David Runciman’s piece on the blog of the IPPR thinktank

http://www.ippr.org/juncture/a-win-for-proper-people-brexit-as-a-rejection-of-the-networked-world

which should give anybody working within the Information Economy considerable food for thought…

The Runciman piece strikes me as condescending. I suspect that semantic analysis of this piece, which is not unique in remain literature, versus leave rhetoric, would reveal deep conceptual differences which are not acknowledged. This piece seems to suggest that the leave people are simply those left behind in the digital revolution. The concept of sovereignty, which is central to leave, does not once appear. Thus as an analysis this piece is very one sided.

I happen to be writing about this mess at the moment. Here is a relevant excerpt:

“The point is that there is no way that Britain can simply replace that EU funding (assuming it wants to), even if it has the money to do so. It will first have to go through its own lengthy competitive funding procedures. Many of the existing EU funded projects will probably be dropped in midstream, their funding wasted. There is no reason that the new British government should choose to continue these EU chosen projects, quite the contrary given the Brexiteers apparent disdain for the EU. There may well be a multi-year gap in which nothing is funded to replace the present projects.

Untangling the science funding is thus going to be a true mess, unless Britain can work a deal to simply pay for continued EU funding as an associated country. Some small non-EU countries do this. But given that Britain is handing Brussels a big budget cut such a side deal may not be possible. Moreover, the philosophy of Brexit would seem to preclude Britain ceding funding decisions to the EU, which these associate deals require. The fact that the research community came out loudly against Brexit does not help their case of need.”

Hello David,

I mentioned in my post that pro-Leave ministers including Boris Johnson did promise to continue funding of EU projects through to 2020. That was said during the campaign and nobody on the Leave side cared.

Having lived through the campaign and the aftermath of Brexit, I don’t agree that the philosophy has much to do with decisions about academic funding. If anything those that support Leave made the argument that we’d be able to continue to participate in aspects of the EU that are of benefit to the UK, or at least replicate them with the money that will be saved in saved EU subscription.

If the UK does continue to fund H2020 research grants through to 2020, that gives adequate lead time for the review process. Bear in mind that the UK already has it’s own research council system that is, according to what I’ve heard, the most efficient in the world. It would be more a case of scaling up by something like a third.

The thing that worries me is that the Leave campaign have already over-promised funding based on the saves subscription payments and we’ve barely even gotten started.

I have trouble imagining the Brexit government simply sending the universities checks to cover existing EU projects, no questions asked. Nor can simply throwing an extra billion a year at the Councils do it. We had a drill like this about ten years ago in the US. We coined the term “shovel ready projects” to describe what got funded. In short I do not see how the labyrinthine system of science funding can easily be transitioned, much less in a way that supports existing projects. Johnson’s promise is irrelevant, except to the extent that they might actually try do do something useful. What they can do is very limited.

Note too that this gap might occur quickly, as soon as the UK stops paying its EU dues, which the new government might do. And as you point out, science is a small player in the scrum, not to mention a hostile one. Science backed the wrong team.

The UK cannot just stop paying its dues. We are still a member of the EU until such time as:

1) the conclusion of the negotiations (that have to be) triggered by Article 50

2) The elapsing of the timeframe for those negotiations. It’s currently set at 2 years, but can be extended by mutual agreement.

There’s likely at least 2 acts of parliament needed as well.

One point to further remember is that access to the single market will not be free. We will be charged. Norway pays per capita about the same as the UK does now, but doesn’t get to vote or veto anything.

When thinking of payments for science and other scholarly study, it’s worth reflecting on the fact that this debate was essentially a ‘post factual’ event. Money for evidence and expertise doesn’t seem to be popular here. At least not on the basis of these results.

You are citing EU rules, which the Brexit folks are inclined to despise. What happens if the UK simply stops paying, which it certainly can do? EU sanctions?

We have not left. We’d be in breach of the treaty. We’d destabilise the entire continent. That typically ends badly judging by history.

How in the world would the UK opting out of the EU without following the EU rules to do so destabilize the entire continent (and Europe is not a continent, just a relatively small region in a large continent)? If you mean it might destabilize the EU that would probably be welcomed by the Brexiteers.

You’re joking, right?

Okay. Firstly, no, Europe is definitely a continent. I don’t like to quote Wikipedia too much as some people don’t like it as a source, but in this case I think it’ll suffice given the question.

“Europe is a continent”
source: https://en.wikipedia.org/wiki/Europe

Brexit is a risk to European stability, in fact a potential risk to global stability if not handled carefully, for a number of reasons. Chief among them being the emboldening of separatist and far right parties across the EU. Secondarily, it could lead to the break up of the UK. Scotland, particularly voted in favour of staying and have a strong nationalist base already. There have been a range of discussions around Scotland’s relationship with the EU with everything from a referendum on Scottish independence to facilitate reapplication for EU membership to the negotiation of some kind of associate membership as a special region. Many EU members will support that as they work to shore up the value of the EU as a project but Spain will fight against it because it has it’s own internal separatists to worry about, particularly, the Basque independence movement.

This could all lead to fragmentation and infighting across the region and or these reasons, the Economist’s Intelligence Unit rated Brexit as number 8 in their top 10 list of threats to global security.
https://gfs.eiu.com/Article.aspx?articleType=gr&articleId=2915

Today is the 100th anniversary of the Battle of the Somme. A scar beyond scars, symbolic of what Europe is capable of. Still, today, body parts emerge on farms.

Europe’s history is blood red. The UK has been a part of that European tendency. Diplomacy and cooperation have reduced the risks, by negotiating compromise that had to be killed for previously.

Lest we Forget.

If these threats are real then the UK has far more leverage than I imagined. Preventing catastrophe and all that. But this is not my field so I will stick to government operations.

On the pedantic aside side, if continents are defined by watersheds and politics then how many continents are there in South America? My guess is six to ten. By this standard the west, often called the left, coast of the US is a separate continent. Oh wait, maybe it is.

That’s an extremely unlikely thing to happen. As David says, there are legal mechanisms that are required to end membership and the UK government isn’t just going to unilaterally stop paying the dues and bring the whole system collapse. It’s just not realistic.

What I think you might want to consider is that the UK government held the referendum to appease the right wing. Nobody expected the Leave campaign to actually win and now that they have, nobody is in any kind of hurry to actually do it. Boris Johnson, in his victory speech said that there was no rush to leave the Union and it needed to be done carefully. Even Nigel Farage, the least conciliatory person in British politics, said during the emergency debate in the EU parliament that a new relationship needed to be negotiated.

I think the right wingers, who won, are ready to act. As I understand the Conservative Party rules, if the PM position is contested then it will be decided in early October. Then and only then will we get the Brexit government, unless it can be stopped. The political calculus is simple. They have been elected to get out of the EU. The sooner they stop payments the more billions they will have to spend and in this game money is power. All they need is for the EU to behave badly and it sounds like this may be happening.

So as an analyst I see no reason to take an early out off the table of options. The logic is too compelling.

“…unless Britain can work a deal to simply pay for continued EU funding as an associated country.”

As I understand it, an “associated country” (like Norway or Switzerland) has to allow free movement of people. If Britain does not agree to free movement, it cannot be an associated country and would instead be a 3rd party country.

That’s my understanding as well, although if you follow the link I point to in the post, you can see that the Swiss have won at least some concessions despite having opted out of free movement.

It’s likely, however, that EU ministers won’t be in much of a mood to reach a comprise on the issue because they’ll be keen to discourage others from leaving the Union.

The same issue is reflected in the debate over access to the common market. Again, the EU say that you can’t have one without the other.

One way this could all be resolved is if Britain signs up to freedom of movement despite being outside of the EU.

As I see it the UK, not the EU, is negotiating from a position of strength. The EU government has no money, while the UK government does. If the EU takes a hard line it will play into the Brexiteers’ hands.

Perhaps, but right now the UK hasn’t got a stable government, opposition, or plan for negotiation. How are the negotiating from a position of strength?

The UK is a major funder of the EU. That is a position of strength.

You’re right, they’re not in a position of strength at all. This is about more than who’s a net contributor to whom.

They have no best alternative to a negotiated agreement because walking away from the table means no access to the European market. In addition, the only things that they can offer is either continuing to allow free movement or continuing to pay their membership dues. Doing away with both of those was part of the Leave manifesto. In the end, they’ll have to compromise, which will cause uproar amongst the people who voted to leave. Whoever ends up as the next PM is going to have a bad time.

Threatening to cause global instability isn’t really a bargaining position, unless you’re Kim Jong-Un.

Both sides have to negotiate and I expect the negotiations to be complex, perhaps even defining new relationships. For example, the UK can offer to continue to pay for some things, including science, as already mentioned. Nor is “free movement” a well defined mechanism. That May is a Remain backer suggests that the hard line Leave doctrine may now be irrelevant. Diplomats are very good at this sort of thing.

I do not take the destabilization scenario seriously, but if some do then it is a negotiating element. The future of the EU is certainly on the table.

Indeed Emma, but my point is that the Brexiteers are unlikely to want either, so the issue is moot.

David, underlying your comments seems to be the assumption that the ‘Brexiteers’ are a homogeneous segment of the population on the right wing of UK politics. This just isn’t so. There were a fair few left wingers who supported it. And, if analyses are to be believed, the vote was won by hefty, albeit not majority, support from previous left-wing voters.

Further in opposition to your conclusions are a general sense of pride in the UK body politic that the UK plays by the rules. It might not be logical in a system analysis, but it’s got strong emotional drive here. I’ve not heard anyone of any serious position in the UK suggest we stop paying our dues to the EU.

And I’m not sure how you think the UK is negotiating from a position of strength. Bloody minded idiocy yes. But strength. Hmm. The EU is not on its uppers, even if the UK is a net contributor. Remember the UK has been downgraded already by credit ratings agencies as a result.

Martin, the basic assumption for this scenario (which in any case is not a prediction) is simply that the new government will be strongly pro-Brexit. Of course that may not happen. The Conservatives may even wangle a pro-remain government out of this. Time will tell.

I make no assumption about the demographics of the Leave vote, except to note that in England the numbers are not nearly so close as the UK numbers suggest. This is important.

As an independent analyst I have no personal view on this matter. I am just looking at the machinery, as it were. I view governments as mechanisms of a cognitive sort. If you think the situation is idiotic then your judgement may be compromised by your feelings.

Another concern is that the EU may cut back on research awards to UK Principal Investigators. Why fund someone who may be about to leave the program? The UK government and research intensive Universities should be on the lookout for this sort of discrimination, which might be relatively subtle.

The question is what to do about it? Should the UK government mobilize to pick up the funding slack or wait and see if Brexit actually happens?

This is a worry and if it turns into a substantive effect is worse than UK researchers being discriminated against directly.

The Horizon2020 framework deliberately favours cross-Europe collaboration. Researchers choosing not to collaborate with UK colleagues will result in a smaller number of fundable projects being submitted for review. If there is simply a drop in fundable grant applications, it’ll be much harder to convince anybody to do anything about it.

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