Enet Blog

Aug 13, 2019

Brexit set to drive further growth in Irish data centre market

Boris Johnson's elevation to the role of UK prime minister has led to renewed speculation over the likelihood of a no-deal Brexit and the considerable disruption that would go with it.

There has been a natural focus on the possibility of a physical border between Northern Ireland and the Republic, the economic consequences for Ireland, and our ability to easily trade goods and services.

But one sector that has received less attention - despite underpinning much of Ireland's approach to foreign direct investment - is data centres.

And while Brexit poses a number of difficulties for the UK technology market, it may contribute to further boosting its Irish equivalent, helping attract jobs and investment.

Over the past few years, Ireland's data centres sector has grown to become the biggest in Europe. The city is now home to major companies like Google, Amazon, Microsoft and Facebook. In total, 53 active data centres are currently located in Ireland, with a further 29 in development.

Together, these have contributed some €7.13bn to the Irish economy since 2010. The continued increase in internet traffic - driven by consumer demand, the rise of video streaming, the increasing use of smart appliances and the spread of the 'Internet of Things' (IoT) - means more data is being created, analysed and stored, necessitating even more data centres.

Any future development should see even more broadband service providers being able to use the additional data centres to connect with customers in areas where they may not have had a presence in the past. In addition, any increase in data centres enhances the burgeoning ecosystem of interrelated industries. Simply put, data centre growth allows for diverse connectivity for essential business operations, increases reliability and improves customer experience.

But what impact will the UK's departure from the EU have on the Irish data centre market, and on the country's ability to maintain its position as the market leader?

In the UK itself, technology leaders have long warned against the negative impact a no-deal Brexit would have on their ability to protect data assets and attract further investment.

Complicating matters further is the prospect of a post-Brexit UK being outside the GDPR, which restricts the movement of data outside Europe and other approved countries.

Any organisation doing business in the EU is subject to GDPR, and compliance with this is easier to achieve if data is hosted within the bloc itself.

The UK's departure will therefore add a further layer of complexity to the smooth flow of data between it and other EU countries, and make it far less attractive for the development of more data centres.

Protecting customers' data will become more important, from small retailers to large multinationals, as more commercial activity moves online. To take one recent example, Finnish giant Nokia announced it will move its phone data centres from Singapore to Europe, allowing it to better comply with GDPR and other EU data laws. The UK may soon find itself on the outside looking in, and unable to adequately protect the data businesses depend on.

With a no-deal Brexit becoming more likely, Ireland by contrast is well-positioned to attract a considerable amount of the jobs and investment that would otherwise have gone to the UK's data centres.

Indeed, there is also scope for UK data centres to up sticks and migrate to Ireland altogether.

Over the years, Ireland has developed a world-leading data centre ecosystem, taking advantage of its favourable climate for cooling servers, its pro-business environment and low corporate tax levels.

Given the continued confusion in the UK, Ireland would appear to stand ready to benefit. However, the IDA has stated, regardless of if or how Brexit comes to pass, that it expects Ireland's data centre sector to double in size in the next five years.

If the predicted growth comes to fruition, there is a strong argument for a balanced regional spread, and our experience is that the underlying regional infrastructure exists to ensure this can happen. Facilitating this growth will, of course, bring some challenges, not least in meeting the electricity demands needed to power data centres of ever-increasing scale. EirGrid expects about 15pc of all electricity demand in Ireland will come from data centres by 2026.

Reaping the benefits of Ireland's abundance of renewable energy sources, most notably wind energy, will be increasingly important to meeting the needs of data centres.

The continued presence and expansion of the sector also brings a number of additional benefits to the wider economy. Initial investment in and development of data centres indirectly attract services and new roles across finance, sales, customer support and software engineers. Local educational institutions and students can also benefit, with IT Sligo and industry partners such as Google collaborating to launch a degree programme in data centre facilities engineering - the first in Europe.

The expansion of the IoT, the growth of big data and the onset of what is frequently being called the fourth industrial revolution will all result in great change in how businesses operate into the future.

The messiness and uncertainty that have characterised Brexit to date have already had a damaging effect on the UK's technology industry, severely undermining trust and slowing the rate of investment.

But by continuing to invest in its data centre infrastructure, Ireland is well-placed as Europe's data capital, should a no-deal Brexit occur.

This article was first published in the Irish Independent, 13th Aug 2019”

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