Firstly can I start by welcoming this report, which is pertinent on this Brexit Boxing Day because of the exceptionalism of this sector and the particular challenges it faces from Brexit.
It’s a sector which accounts for a staggering 46% of total UK service exports;
A sector behind a phenomenal 11.5% of global cross-border data flows;
And a sector with just 3 million workers which nevertheless contributes £1 in every 6 to growth in the UK.
With that in mind, I have been making the case to Government since I took this job last September that this exceptional sector should be treated as such as we Brexit.
Because the challenges are utterly profound.
With an adequacy agreement uncertain; data flows unsecured; the rights of hugely productive EU citizens working in our digital sector far from guaranteed; and a post-Brexit migration settlement murky at best, it’s possible that Tech UK’s CEO was guilty of understatement when he said Brexit would only be a “monumental change”.
So I want to start today on talent. The digital sector is growing, its workers are better paid and it is outpacing almost all of our international competitors.
At the heart of that, of course, is talent.
As the report today demonstrates – a healthy chunk of that success is drawn from the hard work of European citizens who have come here to help make our digital sector what it is.
It is therefore, frankly absurd that the Government have not moved to guarantee the rights of EU citizens contributing to our digital economy. 118,000 of them – each and every one paying their taxes and helping our world-leading sector get ahead.
Ministers have told me repeatedly that those citizens are their number one negotiating priority and that they expect to guarantee their rights during negotiations.
But all this is without any appreciation that using them in negotiations at all is sending out a shocking message. Whether implicit or not Ministers are saying that EU citizens contributing to our digital economy are expendable.
Let’s not forget that 90% of digital companies stated a skills gap is materially affecting their operations and two thirds of data-intensive companies reported significant challenges recruiting.
This limbo is totally unacceptable and the Government should immediately, unilaterally guarantee their rights and then let’s start negotiations from a more sane position than bartering with the rights of human beings.
This gets to a broader point though: when tech companies, financial services, software developers were looking for skills – they have invariably over the last decade looked to our neighbours in Europe.
That is not going to stop in two years time. In fact it is only likely to increase while we restructure our skills pipeline and demand for digital expertise grows.
Therefore, it is as clear as day that the UK’s digital success will remain dependent on global talent:
You would hope the Government would agree. But something quite troubling on immigration is being lost; that is that on this issue the Prime Minister is a hawk.
As Home Secretary she laid down a blueprint for the type of immigration control she believes in and, frankly, if extrapolated to EU workers it would be a disaster for the digital sector:
She limited the number of visas available to skilled workers.
Closed the post-study work visa which encouraged talent to remain.
Did everything within her power to discourage international students.
And set strict wage bands.
So we can pretend if we like that the referendum was really only about low-skilled migrants, but there is absolutely no basis to believe that that is what our Prime Minister thinks. And in fact, her record in Government says otherwise.
For May the Home Secretary, numbers mattered.
The number of high-skilled workers fell off a cliff and skilled labour from outside the EU came down reducing talent available to our digital sector and leaving skills shortages.
A repeat of an effective cap and of restrictive, inflexible controls targeting numbers above all else regardless of the skills gap would be as much a disaster as it would be cowardly.
And for those tech companies with operations in the UK and throughout Europe and where employees travel freely between the two, we need to recognise that any immigration system has to allow for that seamless travel.
We know one of the major drivers of pre-Brexit immigration growth was workers moving between countries but within companies, and the Government have to be honest and recognise that a flexible workforce means allowing that movement.
In that context, the measures outlined by Tech UK today are to be welcome; though I fear they may be designed to avert a crash landing when the Government are busy pulling up the entire runway.
An unequivocal right to remain for EU workers; review on reopening the Post Study Work Sisa and a smart, data-driven migration system because for a highly mobile workforce, quotas simply won't work.
But I do get the impression the Government are not yet treating the Digital Economy as exceptional or have it high enough on their priority list.
Take one example: Last week I attempted to get a clear picture of the size of the digital skills gap from Government and the current requirement for additional workers to fill that skills gap.
This will be crucial when the Government are attempting to decide on the pros and cons of various immigration options post-Brexit.
But, astonishingly, DCMS told me they had made no such estimate. They did not know what the gap was!
The figure put at 700,000 by the Commons Select Committee for the digital skills shortage was estimated for 2017. It's 2017 now and it hasn’t been filled and is unlikely to be filled for some time.
One look at the employment market confirms that. Foreign-born workers are accounting for 45% of the net employment growth.
That's why we need a sustained effort to skill-up our workforce.
While the 4 million digital skills training opportunities set out in the Digital Strategy were of course welcome, many of them provided by members of Tech UK themselves, I think it will require something much more systematic.
12 million people lack basic digital skills, but the Digital Strategy will not even come close to supporting 100% digital literacy.
Post-Brexit we will need these ambitious targets.
And we will need to retrain the existing workforce. That's why we need to see a second chance fund to retrain those millions of low-skilled workers who will lose their livelihoods in the decades to come.
When Kellingley Colliery, the last deep coal mine in Britan went under, many of the men retrained as engineers on the broadband roll-out. That is exactly the type of creative thinking we need to see.
We know a way to unlock further growth is to skill up our small businesses. I’m working with the Google Digital Garage on a small scale, which is a great example of what can be done but if we truly unlock digital capabilities in our small businesses we know the benefit to the economy will be somewhere in the region of 2% of GDP. That has to be the target.
And for younger workers, we need a comprehensive education system which matches skills to need. With 61% of businesses reporting weaknesses in IT Skills, that couldn’t be more important.
The Cyber Schools programme to provide extra-curricular activity, it has emerged will only benefit 5,000 pupils or 1% of the school population by 2021. That’s nowhere near enough.
Crucially though, the skills pipeline needs to come from across the UK. The UK Commission on Skills found that London and South East houses 46% of the entire Digital Sector.
This matters because jobs in the digital sector and in emergent technologies tend to be high-skilled and better paid.
So while the new national college for Digital Skills is enormously welcome, its base in London worries me. It may be almost unreachable for people outside London, so the Government must push to open further centres throughout the UK.
With the scale of the challenge clear, we desperately need the Government to start to appreciate the exceptionalism of the sector. It is extremely disappointing that there is no dedicated digital voice at Cabinet level, and that the Secretary of State with responsibility doesn’t even attend the Cabinet subcommittee on Brexit where under May much of the decision making seems to take place.
The limited grasp of the challenges facing the sector by the people that matter was brought home to me yesterday when I asked the Prime Minister about the data adequacy decision from the Commission:
As you all know this underpins tens of millions of data transfers each and every year, transfers which are of phenomenal importance to the entire economy and which have a disproportionate benefit to our GDP.
She couldn’t answer a very, very basic question: whether the UK could even enter into negotiations on an adequacy decision while it is a member state. The treaty and legal advice I have received seem to suggest it is not possible unless you are a Third Country.
The broad point being that the digital economy is exceptional and its growing weight within our economy means it should be treated exceptionally by the government.
But I just want to close by touching quickly on another matter which I think relates to how attractive we are as a destination for international tech workers as a global hub.
I know there has been a rising drum-beat of criticism against the sector – certainly for me recently it seems as if some people within Government are finally realising the internet exists and lashing out at it: I know online content providers, communication platforms, and technology companies will be very concerned that you are making front page news and that you are being dragged into knee-jerk debates.
There is work to be done, no doubt, but it should be done, wherever possible, in partnership. I, and most people in this room, know exactly how you have cooperated on important issues including issues of national security.
As we leave the European Union, I believe our place as a global centre for the digital sector depends on continuing to treat all of you as partners, rather than having threats levelled against you.
And so I will continue to hold the Government to account on Brexit on all these issues but wherever possible I will continue to work cross-party and with industry, not just to get the best possible deal out of Brexit but to secure the best possible future for our economy and for our country.