Brexit will turbo charge the technology industry and radically change real estate

July 2016

The U.K has had its referendum and voted for Brexit. We are assured that ‘Brexit means Brexit’, so unless something unexpected happens (which given the last two weeks would by no means be unexpected) we will leave the EU, ‘take back control’ (sic) and reduce immigration to the tens of thousands, as was promised in the Conservative Government’s Manifesto.

And at that point the U.K economy will change, quite dramatically.

Several industries have high concentrations of overseas workers: processing plants at 43%, cleaning and housekeeping at 34 % and hospitality and retail with 30%. And they are not alone. 16.7% of ALL employees are foreign born (2014 figures).

Now we can argue about how quickly and to what degree these numbers diminish, but it is safe to say that many will not be here in 3-5 yrs, and certainly not that many new immigrants will be arriving. The people have spoken, and this will be the result.

So what, in Economics 101, happens when labour becomes scarce or rises in price? Yes of course, it gets replaced by Capital. At a certain point the cost of automating a process crosses below the cost of employing someone. And what is happening in the world of automation, robotics, machine learning and artificial intelligence? Yes, it is very rapidly becoming very much cheaper to do very much more each year. Put the two together and what is the result? The automation of jobs currently performed by inexpensive migrant labour.

UK workers will not benefit from all their jobs no longer being taken by migrants. The jobs will simply disappear in a tsunami of automation.

Fully automated McDonalds already exist. Amazon has spent billions on warehouse robots. Machines can deal with just about every agricultural task. Room service robots are already out there and self driving cars are improving by the day (Tesla crash notwithstanding).

Data is moving to the Cloud, high speed connectivity is becoming ubiquitous, and just about everyone has a 1990 Cray Supercomputer in their pocket. Add to that billions of ultra low cost sensors being deployed into just about everything, and we have the ingredients for replacing vast amounts of Labour with Capital.

And with Brexit we have the incentive to push the button on doing just that. When motive meets opportunity and capability, then big changes can happen very quickly.

So the tech industry is going to find itself swamped with business to automate tasks out of existence. Whatever can be automated will be automated. And according to McKinsey 45 % of ALL work tasks could be automated with technology available today.

In parallel to all this new technology being developed will be the re-thinking and re-purposing of large amounts of real estate. Fully automated warehouses take a different form. Fast food outlets without the ubiquitous overseas staff will be redesigned (in how they look and how they work), and retail will morph into something very different to today. Customers will continue to demand a great experience when they shop, but how that is delivered will have to be re-designed. And it will be.

And you know what, the end result is likely to be better than now: clever use of smart technology coupled with far fewer (but better paid) staff will force retailers to up their game. With cheap labour available on a pay for what you use basis (zero hours contracts etc) the whole game is to be cheap. With expensive labour, the race to improve productivity is intense. And if you use technology wisely you can of course raise the productivity of any individual dramatically.

Furthermore all this new technology will hasten the move to offices being places where humans go to do what humans do best, rather than as knowledge processing ‘white colour factories’. See my earlier article ‘The Office is Dead’, Long live the Imaginarium’ for more on this.

So, big changes ahead. Turbo charged by Brexit. Was this what most ‘Brexiters’ voted for? Probably not. But as they say ‘actions have consequences’.