Will London continue being the Start-up Capital of Europe as Brexit unfolds?

Discussion of Brexit has been constant since the 2016 referendum; a persistent topic of conversation and debate in the UK (and arguably the world). In 2017, it was my opinion that the UK startup scene would be irreparably damaged if we failed to design and implement a suitable visa program for europeans after Brexit. In the last two years numerous political and social changes have taken place. This post represents my current thoughts on the topic.

It is undoubtedly true that immigration is a positive force for the UK economy; especially in the startup ecosystem. According to a recent report by The Entrepreneurs Network, 49% of the fastest-growing companies in the UK have at least one immigrant co-founder. Signal AI is no different and we have been recently featured in the report as a case study of UK startups and immigrant entrepreneurs. Following the report, a number of articles were published in The Telegraph, CityAM, and ITPro, and covered in Forbes, illustrating the positive impact of immigrants in the economy, sharing some of my own thoughts and comments.

In the UK, a major factor of European entrepreneurship that tends to be ignored is the specific reasons why highly-skilled migrants choose to come to the UK. While there are trends of economic migration between European countries that will be heavily impacted by Brexit, this lack of awareness of the impact Brexit will have, and is already having, on the entrepreneur and startup ecosystem in the UK, and London in particular, is damaging. 

London and the UK are uniquely positioned due to a combination of readily available capital, an entrepreneurial attitude, and access to multi-disciplinary talent networks. Historically, London has been perceived as a welcoming, diverse, and growing metropolis. One that is the implicit capital of Europe, especially for startups and scaleup technology companies. However, as global and European perceptions of the UK shift, the immigrant founders-to-be and other talented individuals will start establishing their businesses and settling in other countries.

The recent political and social changes in the UK, with Brexit at the center, have produced a level of uncertainty not felt in the UK for decades. It has also bolstered the actual belief of some that immigrants are not welcome in the UK. At the same time, this has cultivated the perception for immigrants that they are not quite as welcome as they were before. I won’t get into the murky debate of whether this perception is founded in truth or not. But, based on discussions with entrepreneurs and technical people, I can assure you that the perception does exist. This has resulted in talented people actively leaving the country, closely followed by various UK-based academics and entrepreneurs. With many I know personally saying that they would not have considered building their careers and lives here if the current political climate was prevalent when they did. 

This perception is exacerbating the current talent war that we are seeing in the UK. And the two combined is building a perfect storm. The demand for skilled and talented individuals is much higher than the current homegrown (and educated) supply. Given this demand, we need to either train more local talent by improving education and changing tactics to attract more people to STEM subjects, or import talent from other countries. For the former, the UK has consistently tried (and failed) to train enough people to meet its own demand and this situation will not be changing any time soon. Therefore, the latter is the only realistic option. We need to promote and nurture immigrant talent by creating seamless processes to allow migrants with the required skills to support UK businesses. Of course, we should also continue working with educational institutions to cultivate talent from within the UK.

Any changes in the visa process will be dealt reasonably well by medium and large enterprises which, due to their size and organisation, are significantly more capable to handle immigration and visa changes. On the other hand, startups and scaleups will suffer as they usually have limited capacity to deal with complicated HR issues, visa compliances, and bureaucracy. This will directly impact the flow of talent into, and out of, tech-based startups and will damage our startup ecosystem. Creating a shift that could dismantle London’s unrivalled leadership as the startup capital of Europe. 

I believe that, in order to limit this damage, the government must work hard to rebuild and maintain the perception that the UK is a welcoming country for talented individuals. It also needs to support these individuals and companies by making the importing of talent as seamless as possible. This can be achieved by heavily simplifying and properly advertising our visa processes. For instance, one of the most counter-intuitive legislation changes was the removal of the post-study visa by Theresa May in 2012; a decision that meant that even though UK universities train some of the best international talent in the world, partially subsidised with taxpayer’s money, these students were required to leave the moment they finish their studies. The good news is that, after (years of) pressure from organisations such as Coadec, TechNation, and The Entrepreneurs Network, and individuals such as Jo Johnson, this policy is now in the process of being revoked. While this is a great start, the UK needs to do much more. Starting by simplifying the Tier 2 visa and providing more support and visa training for startups. In addition, as we described in an article earlier this year, we need to advertise and properly position the Exceptional Visa in order for more people to take advantage of it. And finally, we need a scalable process to evaluate candidates in a fair and reliable manner. 

The war on talent in the UK will become even tougher due to the current political uncertainty and will undoubtedly negatively impact the UK’s startup ecosystem. To tackle this the government must simplify and improve the bureaucratic mechanisms it has to support and encourage entrepreneurship. If it does this effectively, startups in the UK with continue to flourish over the next few years. Otherwise, it is clear that cities across Europe will challenge the hegemony of London as Europe’s startup and tech capital.