The Digital Single Market and Brexit

Last updated 24 June 2020

What is happening with the Digital Single Market and Brexit?

The Digital Single Market is a four-year strategy across several policy areas, encompassing numerous regulations and directives. Essentially, it establishes the ground rules for online business in Europe across a variety of areas ranging from taxation to copyright to online privacy.

The DSM has three pillars:

  • Access: e-commerce, parcel delivery, geoblocking, copyright, VAT
  • Environment: telecoms and media, online platforms, security and personal data
  • Economy and society: data economy, standards, skills and e-government

The strategy has comprised 30 legislative initiatives across these topics. As of summer 2020, 28 have been completed, and 2 are in process.

Up until the Brexit referendum, the UK government was enthusiastically in favour of the DSM. This page, for example, set out the Cameron government’s position on the strategy. On that page, David Cameron said “as the digital economy expands there are more and more opportunities for companies across Europe to grow, create jobs and help consumers to secure a better deal. All too often however these opportunities are being stifled by burdensome regulations and differing national regimes. It is time to put this right by completing the digital single market once and for all and unlocking the growth that this market could generate.”

That page’s poetry of “data is beautiful” seems like distant nostalgia. What we have now is the cold light of day like this from a House of Commons committee:

The decision to leave the European Union risks undermining the United Kingdom’s dominance in this policy area. We could have led on the Digital Single Market, but instead we will be having to follow. The Government must address this situation, to stop investor confidence further draining away, with firms relocating into other countries in Europe to take advantage of the Digital Single Market

The digital sector is one of the worst affected by the Brexit vote, and the DSM is a major reason why. ‘Taking back control’ will mean that the “burdensome regulations and differing national regimes” the Cameron government warned against are exactly what we’re about to get.

In addition to greatly increasing the difficulties UK businesses will have trading online in Europe, the UK risks losing the parts of the strategy which have been implemented into domestic legislation with no clear answers on what, if any, non-EU replacement legislation might take its place.

Additionally, as much of the DSM is extraterritorial, UK businesses still trading with European users and customers after Brexit will remain subject to the regulations, but the UK will lose its seat at the table and its right to have a say in what these rules look like.

The information below pertains to the DSM strategy throughout the Brexit process as a whole; its component parts are dealt with on individual pages.

Progress and developments:

  • The DSM was debated in the Commons in February 2015, March 2016, and June 2016, and in the Lords in October 2015.
  • The Cameron Government published this microsite devoted to endorsing the DSM.
  • In advance of the June 2016 referendum, the Department for Business, Innovation and Skills made no assessment of the cost to the UK of being unable to access the DSM.
  • After the referendum the DSM was raised as a specific policy issue for the House of Commons’ attention (see page 147 of the research briefing).
  • In July 2016 and then again in September the European Scrutiny Committee of the House of Commons examined the issues for DSM and Brexit, asking that Government ask these questions of all ensuing issues:
    • The timescale envisaged for any draft legislation or other agreement to take effect;
    • Whether the UK will continue to influence negotiations and vote in the Council on the proposals pending Brexit, or whether it will abstain;
    • Whether it considers the particular proposal in question a policy priority and would wish to apply it regardless of the withdrawal of the UK from the EU (for example by retaining it or adopting it as domestic law or by means of a bilateral agreement with the EU);
    • Whether the existence of different UK and EU rules would create an obstacle to trade or otherwise harm UK stakeholders; and
    • How actively the Government will be consulting the Devolved Administrations on the UK’s post-Brexit position on the proposal.
  • In November 2016 the House of Lords published an inquiry into online platforms and the DSM.
  • In January 2017 the Culture, Media and Sport Committee took evidence on Brexit and the creative and tourism industries within the DSM.
  • In March 2017 the European Scrutiny Committee devoted substantial time to the DSM strategy throughout the Brexit process in a report collating several months of reporting. As Parliamentary language goes, their review is fairly damning of the lack of clarity and attention being given to the strategy by the May government.
  • The report indicates that until the UK leaves the EU, “the Government will continue to play a proactive role in DSM negotiations and votes, using its influence to push for an open, flexible digital market.” That being said, the notion that an actor committed to withdrawing itself from a strategy can continue to carry a respected and influential voice within it is delusional.
  • The report further noted that the Government will provide quarterly updates to Parliament on progress of the DSM strategy.
  • The ESC has requested that by 9 May,
    “the Government provide the Committee with a case-by-case assessment of the extent to which, post-exit, the policy objectives of each of the different Digital Single Market proposals could be achieved solely through domestic legislation or would require some form of bilateral agreement with the EU. We accept the Government’s reluctance to provide information “about the nature of future agreements with the EU or on potential changes to domestic law following our EU exit”, but believe that it is appropriate for Parliament to seek clarification of which digital economy issues can be tackled domestically and which will require a bilateral agreement.”
  • In a wider sense, the Committee asked “what Digital Single Market initiatives could be achieved solely through domestic law, and which would necessitate a continuing bilateral agreement of one form or another.” This question, and all the absurdity of the scenarios it poses, is the pointless squandering of energy and resources which Brexit imposes on the digital and tech sectors in a nutshell.
  • On 22 March the Committee examined the e-commerce package of the DSM as a whole, again drawing attention to the question of “which, post-exit, the policy objectives of each of the different Digital Single Market proposals could be achieved solely through domestic legislation or would require some form of bilateral agreement with the EU.” In November 2017 the Committee cleared the Communication on the package from further scrutiny, satisfied that it objectives are being addressed elsewhere.
  • On 22 November the Committee signalled its approval of the May 2017 mid-term review of the DSM’s progress, while reiterating that
    Regarding the implications of Brexit for the UK digital economy, we note the Government’s clear acknowledgement, in separate correspondence with the Committee, that “the policy objectives of the large majority of Digital Single Market initiatives are cross-border in nature [and] as a consequence of this cross-border dynamic, for most of these initiatives, achieving an equivalent policy outcome from outside the EU would require reciprocal commitments and arrangements for the parties involved.”
  • On 2 March 2018 Theresa May declared that “On digital, the UK will not be part of the EU’s Digital Single Market, which will continue to develop after our withdrawal from the EU. This is a fast evolving, innovative sector, in which the UK is a world leader. So it will be particularly important to have domestic flexibility, to ensure the regulatory environment can always respond nimbly and ambitiously to new developments.”
  • In October 2018 the ESC reviewed three non-binding Communications on the DSM strategy pertaining to data protection, AI, and fake news. The review reads as the Minister for Digital scraping her nails across her desk, as it notes her broad support for all three objectives and the general DSM strategy while listing all the areas the UK is leaving.
  • In March 2019 DCMS and BEIS held a series of webinars for business on preparing for Brexit. A colleague sent me the presentation slides from the webinar on providing online services. I found what was not addressed to be as interesting as what was: mobile roaming, the eCommerce Directive, geoblocking, and .eu names were topics on the table. None of the other DSM issues were discussed. Data protection was a separate seminar.

On a personal note

In March 2018 I attended a “One Year to Brexit” talk at Parliament where Lord Adonis commented that “We’re not going to get the Digital Single Market [after Brexit] because we’re not asking for it.” This simple, obvious comment underlines the surreal situation UK tech and digital businesses now face.