Brexit uncertainty 'killing tech industry growth'
Not knowing what Brexit could actually mean is causing a huge amount of uncertainty, which is already having a massive negative effect on the UK’s technology sector – the country’s fastest growing industry, a survey has revealed.
According to a study by specialist investment bank Magister Advisors, tech companies are already re-assessing their plans about investment in the UK and putting the creation of new jobs on hold. It’s only going to get worse by the time Article 50 is triggered. In the two years before the Brexit deal is finalised the damage to the government-pampered tech sector may be irreparable.
"An incalculable number of jobs, and future growth, will have shifted elsewhere in Europe by the time Article 50 is triggered, and unless there is unprecedented clarity upfront about what Brexit will actually look like, the best tech companies will have to assume the worst and act accordingly," said Victor Basta, managing director at Magister Advisors.
“While the UK government is admirably working at government warp-speed, unfortunately tech moves 100 times faster."
Basta has given a few examples of tech companies that have already revised their plans. An unnamed software firm was about to hire 100 new engineers in London. On the day of the referendum results, a decision was made to go to Germany instead. A UK fin-tech company was reportedly deciding in August whether to expand its Dublin or London operations. The board voted unanimously that Dublin would be a safer choice.
“We wish these were just examples to make a point, but they are not. These are real decisions taken by experienced boards,” Basta said. “Across UK tech this is repeating weekly.”
The firm said that even though Brexit as such may eventually turn out overwhelmingly positive, the effects of the uncertainly would in the meantime have wiped out all the growth achieved in previous years.
“The reason for all this isn’t Brexit itself; no one can guess what it will actually mean, or how negative its implications,” Basta said. “The silent killer is the uncertainty Brexit now forces fast-growth companies to confront.”
A few start-ups have already relocated, and the Berlin government has commissioned a bus to drive around London promoting Berlin as a cheaper tech base guaranteed to remain in Europe.
According to Magister Advisors, British tech companies currently source 50 per cent of their key talent in the UK, 30 per cent of personnel comes from the EU and 20 per cent from elsewhere in the world.
The investment bank identified multiple key issues thwarting growth and investment in the UK tech sector related to Brexit uncertainty. These include uncertainty over immigration restrictions that would make hiring from the EU more complicated, possible future export restrictions and tariffs, as well as the overall slowing down of the UK economy.
Investors, Magister Advisors said, are also starting to look at UK tech companies as national rather than European, which could drive down funding valuations and reverse the gains of the last decade.
"From a tech industry perspective, there can be no Brexit benefit remotely worth this incalculable risk, and cost, to the industry as a whole,” Basta said. "The lines at UK Border Control are like critical lines of software code. Post-Brexit, much of that code could be deleted."
The warning comes after claims a report from Britain's £60bn life sciences and pharmaceuticals industry was shelved because it was too pro-EU. The Times reports that industry leaders met ministers in the Brexit department this month to present their findings. However, their calls for Britain to pursue a ‘soft Brexit’ strategy were met with reservations. As a result, the Association of the British Pharmaceutical Industry decided not to publish the consultation document and to only make it available to members.