Despite the impending Brexit, early indications suggest UK tech companies are continuing to attract significant investment.The acquisition of tech powerhouse ARM along with the $200m of venture capital investment – some of which is from our firm – since the referendum indicate that London is still very much open for business and, as risk investors, we remain undeterred. So why has there been so much concern among protagonists of the startup world and can we expect the UK to retain its leadership position in this high growth sector? One of the key challenges for any small business is finding talent. After all, any shortage of people with relevant skills can stifle growth and become a major headache. The key concern here is that any change to freedom of movement will limit the ability of those with the relevant skills from other parts of the European Union to move to London. However, greater control over migration could also help the government pick and choose who is able to enter the country – whether from inside Europe or beyond. Indeed, the Exceptional Talent Visa scheme already helps companies fast track the movement of skilled labour and could easily be extended to fill specific skills gaps. Startups also worry that Brexit could create more regulatory and legal hurdles. Fintech companies have been particularly vocal on this issue, as they fear that the loss of passporting rights will make it harder for them to expand into other European markets. While this would clearly be a major issue for banks, it may actually be less relevant for fintech companies as they tend to be country-specific in nature. Mobile banking, for example, is far more advanced in the UK than in Germany. Indeed, I would argue that the Brexit could enhance the UK’s position from a regulatory standpoint. Without constraints from EU legislation, presumably the UK can make its own economic policy, incentives and even state aid where needed and build regulatory bridges to the largest financial market in the world – the US. The UK government has already implemented a UK specific regulatory environment giving local companies a head start. So it seems odd that fintech entrepreneurs and investors are not celebrating the opportunity to further distance themselves from the tough, and often expensive, regulatory regime of Europe.
Read more on recent financial investments in the UK:
- Birmingham firm’s reminder service wins Uber investment and Travis Kalanick strategy
- Leon to more than double number of restaurants with £19m OakNorth loan
- David Haye provides recruitment app a fighting chance with £2.65m seed round
Richard Branson hosted a sudden Brexit Q&A following the reveal of the EU referendum and claimed leaving the EU is a devastating business bloodbath.
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