The disruption to data flows between the UK and Europe from a no-deal Brexit could be “unprecedented and extremely damaging” for British businesses, hitting investment and ultimately the economy.
That is the damning conclusion of a new report published by University College London, which details just how crucial the data industry is to the modern economy.
With 75% of the UK’s data transfers occurring between the UK and the EU - and back - the report states that the UK’s economic activity is “dependent” on intra-EU data flows, which are “vital for virtually any business with customers, suppliers or operations in the EU".
In the event of a no-deal, “instant disruption to EU-UK data flows would ensue,” as "the UK would immediately become a third country in EU law", the report points outs, adding that the lack of a transition period, would create huge difficulties for companies which increasingly rely on data for commercial success.
As a third country, the UK can negotiate an “adequacy agreement” with the EU to continue transferring data but most experts agree that these deals are not struck overnight. Japan was the most recent country to sign an adequacy pact and that deal had been years in the making.
Without an adequacy decision, UK firms can still send data to companies in the EU but they are barred from receiving any information back.
While disruption in the short term seems likely, the report states, the lack of harmonised data protection regulation could also pose serious threats to the UK’s economy over the long term. It concludes that “it could also lead to the UK being less attractive to investors and thus generate knock-on effects for the economy at large.”