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Data Center | Industry |

9 January 2018

What Does Brexit Mean For UK Data Centers?

Written by Peter Judge (Guest)

Peter Judge is the Global Editor at Datacenter Dynamics. His main interests are networking, security, mobility and cloud. You can follow Peter at: @judgecorp

Great Britain is in the process of negotiating an exit (or so-called “Brexit”) from the European Union. The rest of the world (and something like half the British population) is wondering why, and whether the current government is competent to deliver on the promise.

In the data center sector, what effect will all this have on those who operate and use digital infrastructure? At this stage, it’s just too early to tell what the outcome of the negotiation will be, let alone what effect it will have on one specific sector of industry, but there are some pointers we can consider.

The first thing to say is that the shadow of Brexit has so far not had any obvious impact on data centers. Large builds are continuing, and new data centers are being ordered up. This is happening despite the uncertainty, and a drastic fall in the value of the pound. There is also a possibility that large parts of some business sectors - such as finance - may relocate abroad. And Britain’s neighbours such as Ireland, Iceland and Sweden are making big efforts to position their own data center markets as an alternative to London and Great Britain.

“It would be easy to assume that colocation providers across London must be struggling right now,” says Penny Jones, analyst at 451 Research (in the October/November issue of DCD magazine, which refers to 451 Research’s Multi-Tenant Data Center Market report for London. _“But they have proven that this is not the case.”_451 Research believes that London added some 463,000 square feet of colocation data center space in 2016, while CBRE reckons that 60% of the demand for European data centers comes from Great Britain (UK).

The thing is that Great Britain has a fairly specific role. Great Britain and more specifically London is the largest market for colocation data center space outside the US, but the country does not have many of the giant webscale data centers operated by the likes of Google. Amazon Web Services (AWS) and Microsoft Azure.

That kind of service is very sensitive to the cost of power, and less tied to a given location. As long as they remain close enough to get a reasonable latency, the webscale data centers can migrate to where the power is cheapest or (if required by marketing) greenest. Great Britain has very expensive power and low power availability compared with many other countries, and is still highly reliant on fossil fuels,

Colocation, on the other hand, remains strong, as most organisations have not yet put all their digital resources into the cloud. They want their resources locally, so IT staff can check on the status of their hardware, and are prepared to pay higher power prices if they have to. So Great Britain can afford to pass up the kind of giant bit-barns which are appearing in Ireland, Sweden, and several US states. That sector will continue to grow, but it’s not likely to have much relevance in the British Isles.

At this stage, nothing seems to be stopping colocation deals. It seems to me that one effect of Brexit may be to push the investment towards retail colocation, and cause local data center providers to downplay their offers of wholesale colocation.

Wholesale customers will be large enough and mobile enough to move out of the country if need be, but it seems there are enough smaller organisations with local colocation needs to fill all the space the sector can build. However, Brexit may also introduce issues around privacy. Europe is developing strong protections on privacy in its GDPR (General Data Protection Regulation) which includes stronger requirements for data and the way data is handled.

Just now, there is no possibility of any immediate split, as Great Britain and Northern Ireland (the UK) has signed up to GDPR whilst still in the EU. GDPR will becomes law in May 2018 - even though this is after the March 2018 Brexit date (and within the likely transition period when European rules still apply in any case). Beyond that, British privacy rules might diverge from those of Europe (though any moves to do so will face opposition from the data center sector, as stepping outside GDPR would impact on UK providers’ ability to do business in Europe). If the rules do diverge in future, we may see a requirement that workloads are split between the UK and continental Europe.

I’ll be looking at the way privacy has pushed enterprises to keep their data more locally - so-called “data sovereignty” - in a future blog. For now, it’s clear that any concerns over Brexit are being well offset by high demand for colocation in the UK, and the well developed market that supplies it.

Note: Peter Judge is global editor at DCD. You can read more of Peter's blogs here.

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