Microsoft UK officer suggests moving data centers because of Brexit import tariffs
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The logo of Microsoft Corp. are displayed on cups in the pantry of the company's Office and Experience Center in Hong Kong, China, on Friday, March 4, 2016. Microsoft is rolling out a new service for its Windows 10 operating system to help large businesses detect hackers, security threats and unusual behavior on their networks, rivaling companies like FireEye Inc. and Symantec Corp. Photographer: Billy H.C. Kwok/Bloomberg via Getty Images Israel)

“If all of a sudden there are huge import [tariffs] on server racks from China or from Eastern Europe . . . that might change our investment decisions.”

Microsoft is weighing the move of its UK-based data centers on account of possible new import taxes, said Microsoft’s UK government affairs manager Owen Larter in an interview last week.

Speaking during a Voices For Innovation webinar on January 19 on Brexit, Larter was asked about the potential negative impact of leaving on Microsoft’s business in the country.

“We’re really keen to avoid import tariffs on any hardware. Going back to the data center example, we’re looking to build out our data centers at a pretty strong lick in the UK, because the market is doing very well,” he said, echoing some of the themes echoed by many trying to calm down anti-Brexit hysteria. But he went on to touch on a real issue with the UK’s leaving the European Union.

“If all of a sudden there are huge imports [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 centers across other European countries.”

The issue of new import tariffs came up last week when UK Prime Minister Theresa May confirmed the country would leave the ‘single market,’ or the ability to export and import goods and services between EU member countries, as well as allow free movement of workers.

He did express optimism in a few arenas, including on Donald Trump’s big talk about supporting the UK in its Brexit efforts and hoping to make British trade a priority, a somewhat refreshing tone considering how much doom and gloom has surrounded talk about Brexit and the Trump administration.

“I think secondly we find an opportunity here on trade policy,” saying there was a lot of “alignment” between what the Brexit-facilitating UK government is trying to do and the major tech corporations are trying to do right now. “They are sort of data-driven industries by their very nature by being services industries, so were hoping data liberalization aspects . . . which are at the heart of the cloud will also be at the heart of these future trade arrangements.”

But the risks are there for companies like Microsoft.

“That kind of bright future is likely not going to be possible if we make it a lot harder to transfer data, store data from the EU and into UK data centers.”

Simply by restructuring relations between the UK and EU, any new bureaucracy could encroach on the way data is moved beyond borders, including with countries like the United States.

“There’s also the other aspect of data flows that is between the UK and you guys over in the US,” said Larter, speaking directly to the audience at the event itself, noting that data flows at the present time come under the governance of the EU-US Privacy Shield. The UK would have to negotiate its own deal with the US and all the legal complications that come laden with a new agreement.

“We’ll be able to get that deal right … we want to make sure that happens in a timely fashion so there isn’t any friction there and there isn’t any uncertainty for us or our customers on data flows.”

The issue of immigration clearly was a major motivation to vote Leave. The EU ties member states’ hands in terms of the free market, and has forced it to be strict about allotting visas to non-Europeans. This might allow the British startup ecosystem to recruit more Indian and Chinese engineers and professionals, a major source of new labor that other countries (like France and Portugal) are hoping will fill gaps in parts of the tech economy.

He was extremely hopeful it would mean bringing in more students to be British-trained as well.

“We need more students coming here being trained up, then staying here.”

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