Brexit: The Aftermath For UK And EU Startups

The result of the Brexit vote has come to many as a shock, even though the growth of a populistic movement in countries across the globe has been perceived for a while. Britain’s economy will take a large hit if the “Leave” campaign’s intentions of restricting immigration and shared regulations are followed through – probably no one more so than the UK startup community. The remaining EU members will be impacted deeply – but new opportunities arise for emerging hubs.

Other EU hubs will benefit from the exit of the startup-behemoth London – especially Berlin, which has recently competed in a neck-to-neck race with London as the leading startup city, will confirm its position as the EU’s startup capital.

A Decision Against Expert’s Opinions

Friday morning didn’t just see a split of Britain from the European Union, but also a split in society and mentality. As demonstrated by countries across the globe, there is a growing divide between the populists and those who seek to find gentler solutions to the increasingly complex problems we face. While economists and key political figures like President Obama voiced their concern throughout the past months, UK voters disregarded their opinions and voiced reluctance to listen to the voices of “experts” and elites.

The Brexit campaign built on the frustrations of economic turmoil, societal inequality, and the far-right mentality growing from the Schengen free movement and refugee crisis. It further played on the inefficiencies of the EU itself. What stood out was the frank disregard for facts – from the amount of weekly payments by the UK to the number of EU regulations placed on standard items – numbers that sounded incredulous, as, in fact, they were. For the “Leave” campaign it was about emotions – discontent, fear, and a longing for Britain’s days as a global powerhouse.

The impact of yesterday’s decision is expected to leave a dent in Britain’s economy. Uncertainty had already led to a decrease in the value of the pound, but the Brexit is estimated to induce higher unemployment, stagnation in economic growth, as well as decreased spending and investment activity.

Impacts For UK’s Startups

For UK startups the coming separation from the EU will have dire effects. Highly-motivated, highly-skilled tech talent from the member states, which has been flocking to London and other major UK cities, may find it more difficult to work at British startups if politicians really cut down on the border free movement. Accordingly, the majority of the UK tech- and startup scene sees the exit as a danger to the prosperity of the ecosystem. Brent Hoberman, creator of the tech group “Founders Forum” says his survey across several hundred startup founders concluded that more than 90% were in favour of remaining in the EU. However, initiatives like the “Entrepreneurs for In”-letter composed by “Innocent” beverages founder and signed by startups such as Skype, Ebookers, and Net-a-Porter did little to bridge the gap to those who believe Britain is going to be better off on its own.

Although relationships between Britain and the EU tense for a while, the EU has effectively lost its second-largest member state and has to stomach another hit to its principles. For the startups in the remaining EU member states, transactions to and from the UK, customs, bureaucratic procedures, as well as hiring may become a lot more difficult. However, not all sentiments are negative. Other EU hubs will benefit from the exit of the startup-behemoth London – especially Berlin, which has recently competed in a neck-to-neck race with London as the leading startup city, will confirm its position as the EU’s startup capital. For prosperous startups it will become less attractive to resettle their headquarters to London, enabling their native cities to keep on profiting from their success. Dublin, already a favourable location due to its tax incentives, will gain even more momentum as startups look for a strategic spot for EU-US relations. Reversely, British entrepreneurs will have a higher incentive to create subsidiaries in the remaining EU member cities. Across social media, entrepreneurs and startup networks are already calling on their disgruntled peers from the UK to relocate to their own cities. On Thursday UK voters possibly gave London its fatal shot as the FinTech Hub of Europe – but contenders such as Luxembourg, Paris or Frankfurt are already in the race to secure the title.

As part of the Viennese startup ecosystem we hope that Vienna as the geographical centre of the CEE region will gain momentum, especially as Chancellor Christian Kern and other prominent political figures have recently demonstrated their intentions to make Austria a more welcoming space for startups.

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Photo credit: abegum via Visualhunt / CC BY

Sources:

The Guardian I
AFR
Forbes
Economist
The Guardian II
Deutsche Startups