Brexit Impact Assessment: The Implications in leaving the Digital Single Market (DSM)

The European Single Market (Internal Market or Common Market) is one of the biggest economic achievements of the European Union. The core principle is the free movement of goods, services, people and capital. Interestingly it was Francis Arthur Cockfield, a Conservative British politician who served under Margret Thatcher and the Delors Commission as a European Commissioner for Internal Market, Tax Law and Customs who did the groundwork for the creation of the Single European Market in 1992. He is known as “The Father of the Single Market”. 

The Single Market offers access to more than 560 million consumers and hundred of thousands of businesses that all operate under the same regulatory regime. However, there is a wide misunderstanding on how this market actually operates. There are multiple Single Markets. These cover products, services, financial services (and the monetary union), healthcare, atomic energy, non-atomic energy, aviation, defence and digital services. Various EU regulators, such as EBA, EMEA and Euratom regulate these markets, and the European Court of Justice has tasked with interpreting EU law and ensuring its equal application across all EU Member States.

Leaving not just one Single Market, but leaving all these markets at once would be a disaster for British businesses and consumers. To turn back the clock by 43 years will have unprecedented consequences. Having worked for the telecoms industry, leading and implementing EU data protection regulation and other EU regulations (such as MiFid, CRD/CRR and PKI standards) and working for the European Commission’s DG Information Society, I strongly argue that the Government needs to make a serious effort to keep the UK in the Digital Single Market (DSM), or at least that it makes a commitment for regulatory alignment.  

It is estimated that the European digital economy is worth €415 billion a year (see DG CONNECT website). Immediately after the EU Referendum authorities both public and private tried to boost business confidence that the UK would continue to adapt to and meet the adequacy requirements of EU regulatory regimes. It is a policy domain that spans a wide range of regulatory regimes. It covers electronic commerce, audio-visual media services and a wide-range of Internet services. 

Shortly after the EU Referendum I got involved in conducting a comprehensive impact assessment with European and UK experts, covering multiple policy and regulatory domains. This assessment will be released shortly. The following Section summarises the assessment for the Digital Single Market. 

1. The Information Society and electronic media are intrinsically borderless, and the UK would have to continue to adapt to and meet the adequacy requirements of the EU’s regulatory regimes to get frictionless access to the market and consumers.
2. Electronic commerce and the Digital Single Market: With the launch of the DSM strategy in May 2015, the EU has launched a new Single Market for better access for consumers and businesses to digitalised goods and services. Regulatory overhauls to the telecom rules, the audio-visual media framework, cybersecurity, data protection, and clearer definitions of standards and operability will oblige players outside the DSM to adapt to the new EU regime if they want to partake in the EU market. Benefits accrue to those partaking in DSM, like industry partnerships to offer cybersecurity, a European Cloud solution, and funded development programmes. 
3. Electronic Commerce in Europe is likely to become dearer for UK consumers and businesses due to the depreciation of the pound amongst other factors. The average UK eCommerce shopper spent €3,625 in 2015, which highlights the importance of an active participation in eCommerce by businesses. 
4. Audio-visual media services: the British TV, film and creative industry has benefited greatly from the European audio-visual media market, which is estimated to be worth around €97 billion a year and employs between 0.7 and 1.1 million people. By leaving the Single Market, it is expected that the UK will lose talent; millions in funding to finance productions and/or distribution; (easy) access to its most important market (over 50% of British exports to the EU); and its influence on key regulations, such as online streaming. The UK has been also able to attract major US producers who use the UK as their European headquarters. On the positive side, Brexit could lead to greater flexibility in setting TV advertising policy. 
5. Data Protection: data protection is currently undergoing a major regulatory reform through the EU General Data Protection Regulation (GDPR, EU 2016/679). The current EU regulatory body (Article 29 Working Party), on which all Member State data protection regulators are represented, will be superseded by the European Data Protection Board (EDPB). This raises questions about the UK’s future relationship to this regulatory body. It is expected that UK law will continue to mirror the GDPR, although in case of a hard Brexit it would nonetheless be treated like a third country, which would entail an assessment for adequacy.