What Brexit could mean for tech start-ups
The referendum on the UK’s membership of the EU is less than two weeks away, with both sides accusing the other of exaggeration, scaremongering, and sensationalism. The fact remains that much of what will happen if Britain leaves is up to guesswork. No one truly knows how it will affect the economy in the short and long-term, how long it will take the UK to negotiate and re-negotiate trade deals, and what effect that might have on businesses and households.
However, here at the 4.5 Blog our focus is tech start-ups and what impact Brexit might have on the entrepreneurial ecosystem in which we have been embedded for the past five years.
So what would Brexit mean for the UK’s entrepreneurial ecosystem and the start-ups working in it?
Is the UK lacking in technology talent?
Many believe the UK is behind in technology and must rely on IT talent from other countries. There is concern that Brexit would hinder those who are eligible and qualified from easily coming to work in the UK and threaten Britain’s standing as a technological innovator and disruptor.
Nicolas Colin of TheFamily writes: “Brexit’s major consequence would probably be an unprecedented shortage in know-how [in the UK],” he says. “Besides the abundance of capital, the UK’s large pool of international talent has long been one of the ecosystem’s major strengths.”
“The UK’s ‘home grown’ tech talent pool is seen as limited, with supply being outstripped by demand,” writes Jon Snade of ITProPortal. “If the free movement of workers within the Union ends, the concern is that this would negatively affect the ability of UK tech and digital businesses to access developers and engineers with the right skill sets from abroad.”
What happens to ‘free movement’ if we leave?
Perhaps even more pressing is what would happen to existing EU nationals in the UK if Britain does leave (and vice versa to UK nationals living in EU countries). Companies and start-ups in the UK that already have a number of EU nationals on staff fear the impact of Brexit on their workforce.
“In the event of Brexit, the legal status and right to work of the British nationals already in our Berlin team would become uncertain,” Charlotte Morris of German-based language app Babbel told CNBC. “To operate a successful UK business, we need British talent here in Berlin — restricting freedom of movement damages opportunities for British people to move overseas.”
The Telegraph reports that “Brits who have already exercised their right to live in EU states can expect to keep that right after Brexit” and vice versa, but that “after Britain had left, Brits’ ability to live and work in EU nations would depend on new agreements the UK negotiated with those nations.”
Leave campaigners argue that free movement can be negotiated, although cannot provide assurances or a timetable. “The basis of the UK’s future relationship with the EU might not be clear for some time,” writes Kingsley Napley of Lexology. “The recent trade agreement between the EU and Canada took seven years to conclude and it seems unusual for any international trade agreement to be concluded in less than four years.”
The Digital Single Market
The EU’s Digital Single Market initiative aims to create a level playing field for ecommerce across all 28 EU member states, “tearing down regulatory walls and moving from 28 national markets to a single one. This could contribute €415 billion per year to our economy and create hundreds of thousands of new jobs,” says the EC’s website.
Jon Copestake wrote in Retail Week that he thinks Britain will lose out on its slice of the €415 billion pie if Brexit happens, which would affect the economy and the amount of start-up investment available. This was echoed by the German Finance Minister, Wolfgang Schäuble, who the Independent reported saying “Britain would be able to continue having access to the single market only if it agreed to pay into the EU budget.”
The personal is political
As always, personal experience often feeds one’s political leanings. 2Pears is an example of the benefits of EU membership and free movement. Our two founders are Swedish, residents and employers in the UK over 15 years. The panellists at our seminars cross international borders. Our pitching competitions draw both US and European countries wanting to set up in the UK, in addition to the homegrown innovative UK startups. But beyond what we personally see, there is overwhelming evidence that the flourishing entrepreneurial ecosystem in the UK, and the talent need to maintain the UK’s reputation for innovation and disruption, are better served by the UK remaining in the EU.