British companies face an increase in costs if a data-sharing agreement is not reached with the European Union.
A report by the New Economics Foundation and UCL’s European Institute warned that there is big impact to the UK of EU data rules in the event of a no-deal Brexit.
The report found that British companies risk costs between £1 billion and £1.6 billion – unless the UK can show the EU that it has appropriate measures in place to protect users’ data and privacy.
In the event of a no-deal Brexit, UK firms – which currently transfer data between the EU and the UK – will be excessively affected and are likely to face new legal fees, according to the report.
It estimates the average compliance cost to be £3,000 for micro firms, £10,000 for small, and £20,000 for medium-sized business. Large enterprises will face about £163,000 in legal fees.
“This extra cost stems from the additional compliance obligations – such as setting up standard contractual clauses (SCCs) – on companies that want to continue transferring data from the EU to the UK.
“We believe our modelling is a relatively conservative estimate as it is underpinned by moderate assumptions about the firm-level cost and number of companies affected.”
Many British SMEs will not be able to pay the compliance costs that accompany contractual clauses.
The report authors warn that the total costs could deprive businesses of investment in new technology, research and staff at a critical time. Data centres, digital technology, and financial services are likely to be the worst hit in that situation.