Disrupting Brexit Is the UK Tech Industry’s Biggest Challenge

Over the last few years the UK’s growing tech industry has made progress on solving a number of problems. From navigating through cities to locating the cheapest flights, the success of companies across the country has helped it to build a reputation as a global centre of excellence.

Now the sector faces perhaps its biggest challenge: navigating the uncharted territory of the UK’s divorce from the European Union.

A group of nine investors and founders, including Brent Hoberman, the co-founder of Lastminute.com, have come together to make a series of recommendations to Prime Minister Theresa May, which they believe will ensure the UK remains an important hub for digital innovation.

Chief among these is access to talent through skilled migration.

Research conducted by venture capital firm Balderton Capital and presented at Techcrunch Disrupt London this week found that 82 percent of respondents were concerned about access to talent in light of Brexit.

The same study also showed that 22 percent of those people working in the UK tech industry were non-British and that 42 percent of startups were founded with at least one non-native founder.

The UK currently has 31 percent of Europe’s startup employees versus 19 percent in France and 18 percent in Germany.

Should the UK get its Brexit approach “wrong” and lose 20 percent of its startup workforce then the European tech landscape would be completely reshaped, according to Balderton. The new split would be: UK (24 percent), France (23 percent) and Germany (22 percent).

Similarly, of the businesses operating in London-based incubator Traveltech Labs, 41 percent were founded internationally and either decided to base themselves in London or to set up a London outpost.

“If you look at the amount of tech companies here that have been founded by first- generation or second-generation immigrants, it’s somewhere between 30 and 50 percent. You will throw away a lot of those,” said Hoberman.

To maintain London’s position, Hoberman and the others want to see the introduction of a STEM passport (Science, Technology, Engineering, Mathematics) as well as a zero-tolerance approach to hate crimes to ensure the UK is seen as a welcoming destination.

While the approach is laudable, the problem is that the government has yet to formally announce what the UK’s relationship with the EU will be like post-Brexit, and it’s all subject to negotiation, as well. May has indicated on several occasions that freedom of movement will likely be curtailed.

One of the main reasons cited for the leave vote was the wish of some voters to see the UK have more control over its borders.

The idea that immigration has been a force for good in the UK is something that Hoberman believes should have been made in the run-up to the June vote.

“One of the things that I thought that was missing from that whole debate previously was big business making the case for immigration,” he said.

“It [big business] never really tried to go out there and make a nuanced, sophisticated case to say ‘this is why it helps the economy, [they] are net contributors to GDP, if you take it away this is what happens’. So of course we understand the strain in certain communities, it’s not all been perfect, but big picture it’s been a net gain.”

The EU Single Digital Market

Another area where the wishes of the tech industry are likely to fall on deaf ears is on the subject of access to the Single Market – the regime that threads the whole of the EU into one territory, making it easier to sell goods and services across borders.

Freedom of movement is considered integral to this concept and European leaders have made it clear that the UK will not be able to have one without the other.

Failure to maintain access would be particularly disastrous for the UK tech industry because of an initiative called the Digital Single Market, which aims to repeat the transformation made to the offline world by removing regulatory barriers online.

As one of the current 28 member states the UK is part of this change but when it leaves in just over two years’ time, it seems likely that it will drop out.

The next generation

Not all of the proposals made by the tech leaders related to the EU. Some, including improving education in digital skills and handing out business incentives, may prove popular with the Conservative government.

“I’m very passionate about actually revolutionizing education and looking forward 10 years creating the best opportunity for people to equip themselves with the new skills they need,” said Kathryn Parsons, co-founder and co-CEO of Decoded.

The problem is that in two key areas: immigration and access to the Single Market, the sector is at odds with the current political landscape. May’s most recent interpretation of Brexit was that it would be “red, white and blue” – a phrase that indicates the jingoistic direction her government is headed.

The message of an open diverse successful tech sector is competing against the belief that the UK needs to take back control.

“You have to keep pushing [and] highlighting the importance of skilled immigration to the sector,” said Hoberman.

“I think we can be angry with the rhetoric. I think it’s not constructive if we want to be heard to be shrill.”

The recommendations were presented at Techcrunch Disrupt London and were made by:

Bernard Liautaud, General Partner, Balderton Capital
Brent Hoberman CBE, Founders Forum
Dale Murray CBE, co-founder Omega Logic
Edward Wray, Co-founder of Betfair
Kathryn Parsons, co-founder and co-CEO of Decoded
Niklas Zennström, CEO and Founding Partner, Atomico
Richard Reed CBE, Co-founder Innocent Drinks / JamJar Investments
Sherry Coutu CBE, Chairman of Founders4Schools
Sonali De Rycker, General Partner, Accel Partners