More comments on likely impact on Indian tech industry, of Brexit:
Bangalore, June 24 2016: The likely impact on Indian Product Engineering Services companies according to Sidhant Rastogi, Partner, Zinnov.
Short term impact of Brexit : A full exit of Britain from EU will take at least 2.5years and 8-10 years for Britain to negotiate trade deals with EU as a whole and may be with certain member companies individually. In the short term, this is a time of high volatility because the incident has no precedent. Markets don’t like volatility. Hence they will react negatively. CEOs do not like volatility too and hence there may be a holding back on certain forms of spending till the schematics of exit is clearer. Pound will depreciate as it becomes less attractive for companies who would want to use UK as the gateway to Europe.
Impact of Brexit on Indian Product Engineering Services (PES) companies:From India perspective, it already has the requisite trade agreements and negotiated immigration / visa arrangements with Britain.In the specific context of Product Engineering Services (PES) companies in India, there is likely to be minimal negative impact. Firstly, UK contribution to India PES addressed market is low. Outside of 2-3 companies, no other Indian company has any large exposure to UK. Even with companies that have an exposure there is no likely impact on the business as the work will continue to flow. Only impact may be on bottom line in case there are non-reporting currency contracts with UK firms due to depreciating Pound. Secondly, hardly any Indian PES firm uses UK as the base to hire and build business in Europe. So again minimal impact from an immigration perspective.
Summary of the Breixt Situation and Likely Impact:Overall, Brexit will only work in favor of Indian PES companies. It is actually a brilliant opportunity for Indian PES companies to cash in on.
Firstly, from a completion perspective, the large European PES companies hitherto enjoyed a huge advantage from the perspective of ease of travel and staffing in UK. This made it easier for them to win and fulfill Engineering contracts compared to their Indian peers. Some EUR PES companies also leverage UK as the base for high end engineering work targeted at complete EUR market. This advantage may also whittle down.
Secondly, India has long been an established trade and cultural partner with the UK because of its common wealth legacy and also due to the proactive outreach of our Prime Minister. Hence, with the current sourness in UK and EUR relationship, bonhomie with India and competition advantage reduced, Indian companies will find themselves better placed or at least at an equal footing when competing for business with UK companies.
Hence, we believe that Brexit is a blessing in disguise for Indian PES companies.
Alka Dhingra, Assistant General Manager, TeamLease Services comments:
With Brexit, the turbulence in IT companies will be for a short term only. The current business flow from UK and Europe may continue, but new business orders may be delayed and subsequently order expansion will be impacted for some time. As the pound value decreases, the margins will go down and it will affect revenue growth of the companies. Currently, around 20-30% of the revenue of companies like TCS, Infosys, HCL, Tech M, Mindtree come from Europe impacting their revenues badly. Even from a mobility perspective the spilt may cause some concern. Mobility of IT resources might become difficult as visa’s will be more specific to the regions now. However, from a long term perspective, Brexit could lead to strengthening of India-U.K’s economic relationship. Brexit will open up many opportunities for skilled IT resources from India.
Further, most of the IT companies who have their operations base in Britain for leveraging the local as well European markets will have to rework on the business plans. This will create more employment opportunities for Indian IT talent across the region.