A major loser in Brexit is London where majority voted to remain: probably, its important financial sector will significantly shrink. An immediate and direct impact will also be felt by technology companies for whom international hiring will get more complex.
Brexit: bad news for tech industry
Memrise, a start-up, desires to make language study so easy it makes one laugh. At the moment, the staff is far from merry. Having lived in London for two and a half years, product development manager Kristina Narusk is currently in shock along with most of her colleagues and acquaintances.
She says that while is it hard and a bit early to tell what exactly is going to happen, one thing is certain: recruiting will get tougher for tech firms. And not in a few months or years, but immediately as it is difficult to plan one’s life an activity of a company while no-one knows what will be happening in the nation in a year or two.
«This is so sad. For tech companies and others with rapid growth, finding talents and people is number one. Overnight, this is now more difficult,» said Ms Narusk. «In our company, 95 percent of staff is from elsewhere in Europe. Purely for the reason that while hiring talents one needs to look all over the world to get the best specialists, not looking at the passport.»
Up to now, the youth wanted to come work in London and for that the EU created good conditions. At that, it is difficult to hire people with a third country passport and under more restrictions.
«We cannot with ease hire Americans or Vietnamese and when these restrictions will apply to all without the UK passport, it will be difficult,» said Ms Narusk. «The initial negative impulse is just this recruiting thing. This is a hit to London as an attractive working environment. Now, perhaps, people will choose some other place instead of London.»
Tech firms in shock
The UK is home for over 40 percent of Europe’s start-ups, valuated at a billion dollars or more. For prime minister David Cameron, technology and innovation have been priorities. One such is TransferWise.
Among its Estonian founders, Taavet Hinrikus said before referendum that it would be madness to exit and they would then consider moving elsewhere from London.
«At the moment, we are on standby,» he said yesterday. «Nobody really imagines what will be happening, but this will definitely impact two areas important for business – regulations and free movement of labour.»
Mr Hinrikus added that the EU has up to now helped Europe’s greatest talents have access to London as movement of labour had no restrictions.
«Also, we have been able to operate on basis of pan-European activity licence – activity licence in UK has allowed us and others to operate over the EU (the so-called passporting),» he said. «We don’t know at the moment what will be with these two topics. On the one hand, not much has changed right now; on the other hand, there will obviously be lots of changes.»
TransferWise is among the numerous tech forms which were for remaining in EU. Among members of Tech London Advocates, 87 percent shared the view. At that 74 percent believed that Brexit would make investments harder to obtain while 70 percent thought London’s reputation as a leading tech hub would be damaged.
After the referendum, tech firms has been in shock. Not only will hiring get more difficult; in the future, it will probably be more complicated to expand activity on mainland and the number of billion-or-more dollar companies in London will shrink.
«Common market used to be a big plus, thus the capacity to grow very fast all over Europe; now we can no longer do that,» start-up Wonderush founder Nelson Sivalingam told Financial Times. «We do not have a large enough domestic market to grow billion dollar companies.»
And as if this was not bad enough, the great fall of the pound may affect start-up opportunities to gain new investments.
On his Facebook page over the weekend, Starship Technologies founder Allan Martinson wrote that for a successful ecosystem (like Silicon Valley) the three main components would be access to talents, access to capital, and access to markets. «Brexit will worsen the position of London in all these aspects,» he wrote.
Mr Martinson does not believe Brexit would have a large global impact on tech sector, but definitely to London. «London has been an unshakable capital for European tech industry, attracting thrice the capital and start-ups than places like Paris or Berlin. It’s been the closest thing to Silicon Valley invented in Europe,» he added.
Loose ends abound
To describe the situation, Mr Martinson suggested a mental experiment of Donald Trump elected as governor of California and he arranges a referendum to secede from the USA. Then, Silicon Valley would stand in a situation like London right now, where majority voted to remain.
«Should California wish to secede, Silicon Valley would definitely not vote favourably. How much of their aura would they retain? Not much, I guess,» he noted. «This is the likely situation in London, right now.»
Jokingly before the referendum, Memrise team was talking about where they would like to move in case of a Brexit. They tossed up Barcelona with its fine weather, as well as Berlin with lots of fun happening for start-ups. None believed this would turn into serious reality.
«At the moment, nobody knows what will happen next. For lots of employees, it is a very actual question if they want to live in a country that does not want to belong to EU,» said Ms Narusk. «Well I’m like that as well – if living in the UK becomes a tremendous bureaucracy, will I really want that?»