Posted on October 18, 2016 by staff

Will Brexit sound the death knell for UK tech?


Cornelia Yzer’s office is a hive of activity and the message emanating from it could not be clearer: Berlin wants your business.

The city’s senator for economics and technology is in the midst of a hard-sell exercise as she looks to prise tech companies and investment away from the UK in the wake of its Brexit vote.

Yzer has been busy. Her pitch is blunt and the strategy behind it is simple.

Companies based in Britain need to be in the EU and while financial services jobs could flow from London to Frankfurt, the vibrant tech city of Berlin wants to entice the cream of the UK’s tech sector.

She’s already written to UK-based enterprises, start-ups and venture capital funds to promote “dynamic” Berlin as a better bet for them following Britain’s vote to leave the EU.

That’s been followed up with posts on Facebook and Twitter and a host of interviews with the international media. And Yzer believes that it is having an impact.

She told BusinessCloud: “The feedback has been overwhelming. Quite a few have responded and expressed interest in moving to Berlin. The FinTech scene especially is quite eager.

“There is an entrepreneurial and pioneering atmosphere around the city that young talent all over the world is taking advantage of.

“Berlin stands for the ‘three Ts’: talent, tolerance and technology.”

The prize up for grabs is huge. Of Europe’s tech ‘unicorns’ – young companies valued at $1billion – almost 40 per cent are British-based.

Nearly one-third of all European venture capital funding consistently comes to the UK and it has the second highest levels of venture capital invested per capita in the world, after the US.

Little wonder that immediately after the Brexit vote, a German political party paid for ads on vans to be driven round London inviting start-ups to move to Berlin.

At the moment that’s no evidence that the advert and Yzer’s sales pitch has resulted in a great exodus: KKR, one of the US’ biggest investors, announced it was putting £50m into Darktrace, a British cyber-security firm, after the Brexit vote.

Festicket, a music festival booking site, raised $6.3m in funding immediately after the referendum and what3words, an addressing platform which is creating a global alternative to postcodes, raised $8.5m from investors.

However, the threat is undeniable. The recent collapse of the value of the pound has sounded a warning that there may be some dark days ahead for Britain.

Gerard Grech, chief executive of Tech City UK, told BusinessCloud before the pound plunged: “Many workers, entrepreneurs and investors in the digital economy wanted to remain in the EU.

“Now, as the initial shock at the result starts to fade, an air of pragmatism is settling in.

“I am also detecting cautious optimism as the possibilities of life after Brexit begin to come into focus.

“No, it wasn’t what we expected, but yes, there are unexpected upsides and very real opportunities.”

Nick Horrocks, director at technology dealmakers GP Bullhound, says he’s seen no signs of companies or individuals looking to pack their bags.

He says: “We’re seeing business as usual. The attitude is it’s all very well panicking, but panic and do what? You might as well carry on doing what you have been doing.

“Certainly in the short to medium term we are not seeing fundamental shifts away from investment.”

Rory Stirling is partner and co-founder of BGF Ventures, the UK’s largest fund dedicated to backing early stage technology companies.

Launched in 2015, its current investments include Network Locum, a staffing tool for the NHS, which raised £5.3m from the fund in a deal that took place after the referendum.

Stirling says: “The industry as a whole was very pro-Remain, so there was a huge disappointment at the outcome.

“The immediate aftermath was quite negative. But you have to remember this is a very entrepreneurial community.

“People got over it very quickly and started to think where the opportunities lie.”

Saul Klein, partner at venture capital fund LocalGlobe, says: “I voted Remain. We lost. But I’m an entrepreneur and professional optimist and still super positive about London and the UK.

“The UK is one of the world’s largest economies and we have been trading with the world and especially Europe for nearly 1,000 years – the relationships are deeper than the last 24 years of integration show and I’m confident that they will mostly remain strong.”