‘Brexit’ Vote Leaves Ed-Tech Companies Unsettled

By Michele Molnar — June 28, 2016 4 min read
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Cross-posted from the Marketplace K-12 blog

British citizens’ narrow vote to leave the European Union left education companies on both sides of the pond asking, “What will this mean for us?”

So far, there are more questions than answers.

“It’s all been thrown into disarray. There’s so much uncertainty,” said Gavin Cooney, a founder and the CEO of Learnosity, an Irish-based company with U.K. clients and employees. Among the unknowns: “What’s the economy going to be like? Will there be import duties to our U.K. clients? Will it be more difficult to do business across the sea?”

The so-called “Brexit” vote—in which 52 percent of British voters chose for their country to exit the economic and political union of 28 European countries—sent shock waves through financial markets and the international banking community.

But the organization that represents companies making 80 percent of sales into British education projected calm, and carried on.

“It is too early to understand the full ramifications of how the nation’s decision will impact on the economy and our trading relationship with Europe and the rest of the world in the long term,” Caroline Wright, director general designate of the British Educational Suppliers Association (BESA), said in a statement she released Friday morning to the more than 300 education companies who are members of her organization.

Jack Lynch, CEO of Renaissance Learning, released a statement Friday afternoon pointing out that the actual process of the U.K. leaving the EU “will take time to unravel,” adding that his company will “monitor the situation and plan accordingly.” Based in Wisconsin Rapids, Wisc., Renaissance sells its cloud-based assessment and learning analytics products in the U.S. and 60 other countries, including the British market.

Many education companies will be closely watching what happens next. British Prime Minister David Cameron—in his resignation speech Friday—said, “There will be no immediate change in the way our goods and services can be sold or the way we can trade.” Wright quoted that statement in her comments to BESA members, about half of whom are ed-tech companies; the rest are textbook publishers, school furniture suppliers, science lab manufacturers, and other education materials providers.

But there was immediate change in the economy. The pound fell to its lowest value against the U.S. dollar since 1985, setting off alarms about a possible recession. The weeks and months that follow will show to what extent the downturn “sticks.”

Bad for the K-12 Marketplace?

“It’s not going to be good for the economy,” said Cooney of Learnosity, which provides tools to help educational providers add interactive assessment to their digital products. His company, which has offices in New York, Sydney and Dublin, was founded during a recession in Ireland. “When there’s a huge recession, education and ed-tech money will unfortunately be one of the first casualties,” he said.

Learnosity does business in the U.S. dollar, as opposed to British sterling, and the U.S. is its largest market. “We might have 5 percent of our business” in the U.K. market, he said, although the company has been looking to expand that presence.

Wright cautioned that changes will not be happening overnight. Recognizing that “today marks an important turning point for Britain,” Wright said decisions will be made over the next two years. Now, a negotiating process will begin, in which “the government has to start debating and discussing with the EU the terms of our ongoing relationship” with Europe, she said.

But for members of her organization, “it’s business as usual,” she said, “and we’ll carry on with our normal trading routes in Europe.” Wright said her country’s long-standing relationships with countries like the United States and others that are outside the European Union, and its commonwealth partners, are standard.

“For schools themselves, it won’t have much immediate or notable impact on the way they do business,” said Wright.

The decision came as BESA prepared to lead a dozen U.K. ed-tech companies to Denver for the International Society for Technology in Education (ISTE) show and conference there.

Wright reassured her members that, “In my conversations with international stakeholders both at ISTE and over the coming weeks and months, I will make it clear that U.K. education suppliers are open for business and we will continue to provide our world-leading educational goods and services to governments, education systems, and schools around the world.”

The Education Technology Industry Network of the Software and Information Industry Association, which represents member companies in the United States, declined to comment on the Brexit vote.

Pearson also declined to release a comment, as did other companies contacted.

But the head of the U.S. Chamber of Commerce did respond to the historic vote.

“American companies’ investments in Britain are worth more than half a trillion dollars, and many of those investments were made to reach not just British consumers but those in the European mainland as well,” said U.S. Chamber of Commerce President and CEO Thomas J. Donohue in a statement to the media. “We are committed to working with the U.K. government to ensure that the priorities of these stakeholders are taken into account in the debates that lie ahead.”

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Follow news about the K-12 education business at EdWeek Market Brief, and through the Marketplace K-12 blog.

A version of this news article first appeared in the Digital Education blog.