Brexit to create uncertainty in near term: Nasscom

The European market is the second-largest market for the Indian IT-BPM industry, constituting almost 30% of the industry's export revenue of about $100 bn

IT industry body Nasscom on Friday said Britain's exit from the European Union or Brexit will lead to a phase of uncertainty in the near term but there will be a mix of challenges and opportunities in the longer term.

Nasscom said likely decline in the value of the British Pound, which could render many existing contracts losing propositions, unless they are renegotiated whereas the uncertainty surrounding protracted negotiations on the terms of exit or future engagement with EU could impact decision making for large projects.

The Europe market is of prime importance to India. It is the second-largest market for the Indian IT-BPM industry, constituting almost 30% of the industry's export revenue of about $100 billion.

Nasscom said Indian IT companies may need to establish separate headquarters or operations for the EU, which may lead to some disinvestment from UK.

It further added skilled labour mobility across EU and UK could be impacted and changes in the financial system, banks and impact on currency could ensue.

"Nasscom urges policy makers in Brussels and London to provide greater clarity and guidance on the next steps as soon as possible, so that our businesses have the certainty they need to continue to invest in UK and Europe,” said Nasscom President R Chandrashekhar in a statement.

However, Nasscom said in the long term, Brexit could lead to strengthening of India-UK economic relationship as UK seeks to compensate for loss of preferential access to EU markets. "This could open up new opportunities for UK and India as well. With the existing 800 Indian companies employing 1,10,000 individuals in the country, a deeper partnership with India may be in Britain's interest," it added.

Additionally, with UK less dependent on intra-EU immigration into UK, it could become more open to high-skilled immigration from other non-EU countries including India, Nasscom said.

Analysts feel Brexit would mean that the EU could slip into recession while Indian companies would also need to rework their strategy to use UK as a gateway for their European operations.