Microsoft could axe plans to expand its UK data centres if tariffs are introduced after Britain leaves the European Union, a senior UK employee has said.
Speaking in an online event about what Brexit means for tech, Microsoft UK government affairs manager Owen Larter said that the American tech company might focus on building out its European data centres at the expense of its two British ones if UK’s Brexit deal imposes import tariffs on hardware and other goods. (We first heard about his comments via Ars Technica.)
“We’re really keen to avoid import tariffs on any hardware. Going back to the data centre example, we’re looking to build out our data centres at a pretty strong lick in the UK, because the market is doing very well,” Larter said.
“If all of a sudden there are huge import [tariffs] on server racks from China or from Eastern Europe, where a lot of them are actually assembled, that might change our investment decisions and perhaps we build out our data centres across other European countries.”
Reached for comment, however, a Microsoft spokesperson distanced the company from Larter’s remarks. “The comments reported today by a Microsoft employee were not reflective of the company’s view,” they said. “As we have said both before and after the EU referendum vote, Microsoft’s commitment to the UK is unchanged.”
The webinar also appears to have been deleted, with the page now displaying a “Page Not Found” message.
After months of uncertainty and confusion, the British government’s Brexit strategy is starting to emerge. Prime Minister Theresa May has indicated the UK will push for a “hard Brexit” — ending freedom of movement and reducing immigration, at the expense of unrestricted access to the European Single Market.
The government plans to trigger Article 50 — the process that starts the UK’s exit from the European Union — by the end of March 2017, kick-starting a two-year negotiation period between Britain and the European Union. Under a “hard Brexit”, companies could face tariffs or other trade barriers when trying to do business with Europe.
The tech industry overwhelmingly supported remaining part of the European Union prior to the referendum — almost 90% of respondents were pro-Remain in one poll. But Brexit is now a reality and there are numerous points of concern for the industry, from access to funding to the availability of talent.
The sector is heavily reliant on skilled immigrant labour — making it acutely vulnerable to changes in British border policy. (Larter said 80% of skilled workers at Microsoft’s R&D centre in Cambridge were not born in the UK.) Stricter controls could see startups and growing businesses unable to bring over enough talent from Europe — or even lose the talent they have, running the risk Britain could become a less attractive place to found and grow companies.
However, Larter suggests that immigration from outside of the EU could help offset a potential decrease in European immigrant labour. “We’ve really struggled internally at Microsoft sometimes to bring people over from the US, from China, from India,” he said. “Even just on a month or week-by-week basis, because the restrictions on immigration from outside the EU have been so severe, because [the UK] couldn’t control immigration from inside the EU and we were conscious about the numbers.”
As well as tariffs on physical hardware, Larter warned that any restrictions on the transfer of data — an issue that the European Union is particularly strict on — could cause issues.
“The UK is actually the EU’s largest cloud market at the moment, and is set to double by 2019,” he said. “That kind of bright future is probably not going to be possible if we make it a lot harder to transfer data and store data from the EU into UK data centres.”