Britain 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.
— Joe Eighthreefive (@Joe835) June 25, 2016
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.
Disappointed Vote Leave letter in the Telegraph.
Are these people THAT stupid? pic.twitter.com/kow7xtZ39a
— John Clarke (@JohnClarke1960) June 29, 2016
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 Innovation, TechCube, 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
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
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.