Few business groups were more hostile to Brexit than Britain’s tech entrepreneurs, who feed off the free flow of ideas, people, money and data. “There is nothing good about Brexit,” one of the biggest tech investors in London told me last week.
Yet, ironically, the UK’s tech start-ups may be better placed than most other sectors to ride out the disruptions of Brexit — so long as the government does not mess up anything else.
More agile by structure, more global by mindset and more reliant on informal networks than bureaucratic hierarchies, tech start-ups are hard-wired to adapt to change, whether it be the Covid-19 pandemic or Britain’s rupture with the EU. They would far rather Brexit had not happened, but they will make of it what they can.
The truth is that during its EU membership, Britain emerged as the undisputed tech capital of Europe. It became an irresistible magnet for entrepreneurs and investors from across the continent. Although Paris, Berlin, Stockholm and Amsterdam are each looking to exploit the post-Brexit confusion, it seems unlikely that London will easily lose its crown.
According to Dealroom, just under $50bn of venture capital was invested in UK tech companies between 2016 and 2020, compared with $23bn in Germany and $19bn in France. The UK also boasts 33 unicorns (start-ups with valuations of more than $1bn) compared with 16 in Germany and 11 in France.
With Oxford, Cambridge and Imperial College, the UK accounts for three of the world’s seven top-ranked university computer science departments — great nursery schools for tech start-ups.
The sector’s biggest fear about Brexit was that Britain would become a less welcoming place for students and entrepreneurs from the rest of Europe and beyond. According to The Entrepreneurs Network, 49 per cent of the UK’s 100 fastest-growing start-ups have at least one foreign-born co-founder.
But the British government has been making particular efforts to keep its visa regime open for skilled tech workers from abroad. “There is no doubt that the UK continues to attract bright and talented people from around the world,” says Gerard Grech, chief executive of Tech Nation, which endorses visas for digital employees.
The City of London will also continue to exercise a big gravitational pull, luring international investors to Europe. London is home to 1,252 venture capital firms, more than any other European city. Sequoia Capital, the prominent American VC company, set up shop in London last year, attracted by the growing maturity of Europe’s tech industry.
Clifton Marriott, a London-based investment banker at Goldman Sachs, says European tech is experiencing a “golden hour”, with a strong flow of companies likely to float this year. “We are continuing to see huge momentum around European tech. We do not see any major impact of Brexit on where companies are choosing to list,” he says.
But in complex human systems, the easiest things to measure are sometimes the least important. Softer factors, such as personal perceptions and interconnections, often play a bigger role.
The pandemic has already triggered an outflow of 700,000 foreign-born residents from London. Many employees have grown used to remote working and tech workers may be more evenly distributed across Europe in future as London loses its allure.
There are some things the British government can usefully do: ensure the continued free flow of data between Britain and the EU, maintain a predictable tax regime and preserve funding for the country’s top universities. But its main priority should be to take the political equivalent of the Hippocratic oath and do no harm.
Ian Hathaway, co-author of The Startup Community Way, says that when politicians become interested in tech they often set big strategic objectives and try to pick corporate winners. In Britain, this interventionist itch has been highlighted by the government’s $500m investment in OneWeb, the lossmaking satellite operator, and its plans to recreate Darpa, the US research agency.
“Government does have a role to play, just not the one that politicians often want it to be,” Mr Hathaway says. “Entrepreneurs seek the answers from the market. I would challenge governments to think the same way.”
In the case of post-Brexit Britain, that means the government should respond in small, practical ways to help entrepreneurs, rather than falling for the fallacy that it can reinvent Silicon Valley. In other words, the success of Britain’s tech sector will largely depend on how far Brexit politicians resist their urge to take back control.