Vote Smart: Exploring the Impact of Brexit On Start-ups

15 June, 2016
Ishita Ranjan

Vote Smart: Exploring the Impact of Brexit On Start-ups

15 June, 2016
London Start-ups
In the run up to the EU referendum, we’ll be addressing key factors that we think those working in the start-up and scale up landscape need to consider. The voice of the start-up and small business community is one of change - disruptive, positive and collaborative change. For this voice to remain informed is more important than ever as the referendum draws closer.

A deeply divisive and widely debated topic, there are strong arguments on both sides of the fence. ‘Fear’ has been the buzzword bandied around by politicians left, right and center. Fear is easy to get swept up in when the only thing both sides of the Brexit argument agree on is the lack of clear fact regarding the outcome. We’re taking fear out of it. Our stance is that Brexit will have serious negative implications for start-ups and small businesses, and we’re going to tell you why. This post explores three key considerations we’ve made to come to this conclusion: Technology, raising capital and recruitment.

Brexit ignites several areas of concern within the tech community; from reaching foreign markets, to the movement of data, and access to tech talent. What we do know is that in 2018, the UK will begin to adhere to the General Data Protection Regulation, an EU regulation governing the movement and availability of data across the EU. What remains to be seen is what a Brexit would mean for UK data protection laws. This alongside the fact that a leave vote would isolate us from our largest trading partner, the EU, rightly has tech start-ups concerned.

What we also know is this: the free movement of EU members results in a large incoming pool of talent equipped with technology skills. With a removal of Britain from the EU roster, we remove ourselves from this pool. The demand for this talent pool in the UK already exceeds the supply. Last year, visa restrictions for foreign technology specialists were radically overhauled as fast growing tech companies struggled to find coders. Given the existing skills shortage and the relaxation of visa restrictions for technology specialists, removing ourselves from the EU seems incredibly counter intuitive as it would further restrict our access to tech talent.

Raising Capital
The UK is home to many venture capital firms who benefit from being in the world's second largest start-up sector and on the doorstep of Europe. This healthy community is already showing signs of struggle at the mere thought of Brexit.

At the announcement of the Referendum, the start-up app Sup had an investor retract potential funds due to nerves over the outcome. Sup is a case in point for how the unknown future of the UK makes the risky game of venture investment even riskier. The referendum rightly concerns venture capitalists - it could both hinder movement of talented people and seclude the UK from the EU market, both factors increasing the risk of failure.


An ongoing theme of concern is the effect that Britain leaving the EU will have on access to talent. Kahn and Satariano wrote in Bloomberg that there are “currently some 30,000 unfilled information technology job vacancies in London” and that “there were simply not enough Britons with the right skills”, an issue we’re all too familiar with as a graduate recruitment agency.

What we do know is that the UK start-up sector benefits from the inflow of highly qualified talent from the EU. What we also know is that fears about Brexit, let alone Brexit itself, has already caused some companies to freeze their hiring and growth plans - including a number of our clients. The uncertainty regarding both the vote itself and the outcome of the vote has seen companies reluctant to hire, an indication that growth is already slowing.

The Brexit debate is a melting pot of confusing, conflicting and contradicting data. Both sides of the debate on a political level have taken a similar line to one another, throwing contradicting facts and figures into the mix. No matter what the outcome of the vote is, we will enter a period of unknown. What we do know is that Brexit will restrict the movement of tech talent into the UK, that the referendum alone has been enough to scare Venture Capitalists and that all signs point to growth being hindered for start-ups and scale-ups.

The start-up community is the voice of disruptive, positive and collaborative change. For that voice to be hindered, whatever the vote’s outcome, would be a crying shame. A vote to remain enables continued access to talent, to capital and to markets. A vote to remain is essential to start-up and SME's growth. A vote to remain is in keeping with the disruptive, positive and collaborative community we know the start-up and SME landscape to be.

Tweet us your thoughts @InstantImpactUK & continue to follow our Vote Smart blog series in the run up to the referendum. This content was contributed by one of our lovely Business Executives, Ted Gibson.

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