With the UK voting to leave the EU in the Brexit, there is a great deal of uncertainty as to the role of London, and the UK in a post-Brexit Europe. The sky is not falling. There will be changes, and there will be uncertainties as the exit is negotiated. Prices of imported goods will likely rise, albeit very moderately, and freedom of movement will be restricted. Perhaps the latter will have the most effect: where visa free movement of employment and residence was simple, it will get more complicated. This will have an effect on a very tiny number of HR initiatives.
We do not believe that exiting the EU is a wise decision. Lowering of barriers, and simplification of structures is always preferable. But, in many ways people won’t notice any changes. There will still be the same overall number of people living in London, who will maintain their current level of demand for all manner of consumer goods. Companies will overall have the same HR needs.
But new initiatives will be impacted. If you run a multinational firm and have to choose between expanding your operation in Germany or the UK, you’ll likely consider the choices differently today, and opt for the easier, more stable option. That more often than not is likely to be Germany. Once the UK leaves the EU, it’s part of a much smaller marketplace. Still one of the largest economies in the world, but dramatically smaller. The long-term growth change is what will affect the UK most.
Ironically, the majority of youth voted to remain in the EU, and they are the ones that will pay the price in their reduced income & employment opportunities. Those no longer in the workforce, or in industries that are disappearing globally were overwhelmingly supportive of “Leave.” Their prospects will not change, and they will come to learn that they chose the wrong option for their own children.
Watching, and listening to the “Leave” supporters reminded me of a trip to Moscow years ago. While there, I encountered a group of demonstrators, protesting against the government, and arguing “the old ways were better.” Putin’s government may not be ideal, but “the old ways” protesters had forgotten what life was like in the Communist run Soviet Union, where people lined up for days for bread and eggs. “The old ways” that those protesters, and the “Leave” supporters opted for don’t exist anymore. Unfortunately, choosing to go that route will likely only result in the “Leave” supporters getting less, not more. Worse, their children face greater uncertainty and struggles.
London as a Global Tech Hub
While both Berlin and Amsterdam have rising startup scenes, no European city is quite as established in the tech world as London is. London has been a business city for decades and tech has begun to permeate through as the digital economy continues to grow.
Named the “Silicon Roundabout”, London’s tech scene, centred around a roundabout in the East London borough of Hackney, has developed a reputation for itself. London is already well known as the financial capital of Europe and this foundation has allowed for a strong FinTech sector to emerge. Besides FinTech, the fashion, e-commerce, and travel sectors also play a prominent role in London’s startup scene.
Since 2010, the tech sector has also been bolstered by the UK government which has created and promoted Tech City UK as a great place for entrepreneurial and investment opportunities. The government has committed £50 million to Tech City in the hopes of attracting more businesses to establish themselves there. As of 2016, 1.56 million jobs are based in the digital tech economy in the UK.
Tech Companies of All Sizes
Companies of all sizes have flocked to London to expand their business. Google has a campus in the city and other big names such as Amazon, Facebook, Microsoft’s Yammer, Intel, Cisco, and Kickstarter have also claimed space in London’s ecosystem. New York’s General Assembly has opened up two campuses in London as well.
Smaller companies like Shazam, Skyscanner, Badoo, Mind Candy, and Hailo are also based in the city, proving that companies of any size have a home in London. The startup count is at between 3,200 and 4,500 companies, with nearly 40 accelerators supporting companies big and small.
Seedcamp, TechStars, Wayra, and Oxygen Accelerator have all been given permission by the UK government to issue visas to entrepreneurs from outside of the EU, encouraging international innovators to immigrate. There are also “specialized” accelerators such as The Bakery, an AdTech accelerator, BBC Worldwide Labs, focused on media, film, TV, and creative industries, FinTech Innovation Lab, run by Accenture and backed by banks, and Bethnal Green Ventures, focused on social and environmental startup solutions.
Of course, London also has something that many other startup ecosystems lack. The city has access to capital through its numerous VCs such as Atomico, Balderton Capital, Index Ventures, Advent Venture Partners, and DN Capital, as well as early-stage funds like Connect Ventures, Hoxton Ventures, and KPMG. Seed and Series A investments are 17% and 26% higher than the European average, respectively.
A Stable Support Network and an International Workforce
London offers startups a stable foundation to build upon. Besides the funding, accelerators, and incubators available in the city, a cohort of co-working spaces, close proximity to the leading minds in the Cambridge cluster, and the fact that the UK is the birthplace of the English language all contribute to London’s thriving tech ecosystem. London’s status as an international hub for culture, business, and transport further attract talent to the city.
Furthermore, Silicon Roundabout’s location, just two stops from St Pancras International where trains from Brussels and Paris arrive, make it an ideal place to start a company. 20% shorter immigration times, compared with the European average, and various entrepreneurial visas also contribute to the availability of a diverse, international workforce.
The Challenges of Starting Up in London
Though the support system is there, there have not been enough London based companies successfully achieving truly big exits. A cultural fear of failure is often cited as a reason hindering the emergence of more billion-dollar companies.
Another issue that is repeatedly referenced as prevalent in London’s startup scene, and of course is echoed the world over is that of ageism and sexism. Only 18% of the city’s founders are women.
Affordability in a city known for being incredibly expensive to live and work in is another hurdle that those with entrepreneurial aspirations will have to overcome. As well, a lack of talent for young startups (compounded by the Brexit) is a continuing problem as many employees get snatched up by the bigger names in town. Pair that with a cramped, sprawling city and ridiculous commutes and London begins to seem less appealing.
Nevertheless, the city continues to grow its tech space. Tech companies now dominate London’s office space, making use of more than finance and insurance companies combined.
Impacts of the Brexit on Tech in the UK
Perhaps the biggest challenge for London’s tech sector to overcome is the Brexit. With the UK officially voting to leave the EU in yesterday’s Leave/Remain referendum, the future is uncertain. Governments will need to begin negotiating the terms of the departure and there will be significant impacts on the UK’s economy, people, and policies as the process to leave commences.
The London tech sector was overwhelmingly opposed to leaving the EU as a Brexit would ultimately make it more difficult to attain and retain international talent, access the EU market, and constrict business dealings overall.
It will be very interesting to see how the Brexit will affect London’s budding tech sector over the next few years and what impact this historic vote will have globally.