Brexit Food

The Brexit Fallout: Where Do We Go From Here?

In my last blog post, I discussed the possibilities facing small businesses in London if the EU referendum resulted in Britain leaving the EU. Unfortunately, that possibility became reality on the morning of 24th June and the resulting turmoil has left the business world in a state of disquiet, anxiety and for some, utter shock.

 

What’s The Damage So Far?

As soon as the news was reported that a 52% majority had voted to leave the EU, the reality and effects of that decision became noticeable. Within 12 hours:

  • The pound fell in value (to the lowest level against the US dollar in 32 years)
  • The FTSE 250 fell by 14% from the previous day’s closing figures
  • The 15 richest people in the UK lost a total of £4 billion collectively as markets plunged
  • Many businesses, such as Vodafone, have warned that they plan to move their business out of the UK if trade agreements fail
  • 25% of company directors plan to initiate hiring freezes during the uncertainty ahead

I know there’s an overwhelming demand for people to ‘stop going on about it’, but I really don’t think most people understand the damage that will be caused if we cut our ties with Europe. If we stop talking about it, we will never get anywhere. There’s no plan without communication.

The only certain thing about uncertainty is that it is uncertain. The uncertainty alone freezes decision making in business, and this causes the economy to stop growing and even shrink, leading to what media outlets are terming ‘Texit’ – the presumption that tech companies will leave Britain, as Britain leaves the EU.

This doesn’t just cause issues for ‘the rich’ and ‘business leaders’, it directly impacts every single person who contributes to society. Right at this moment it makes more sense to setup a business outside of the UK than it does inside it. People seem to have forgotten that our economy is primarily built on service based companies, the contribution of which has steadily grown from 46% in 1948 to 78% in 2012.

These companies can be based anywhere in the world, but choose to be here because of the EU, our relationship with EU countries, and the certainty/stability of the pound. I would love someone to explain to me how this Brexit thing helps us in any way that isn’t someway driven by a generic statement like ‘wanting change’. Wanting change to our political system is a good thing and in my opinion is needed. However, people have been hoodwinked into thinking that leaving the EU means that we will somehow see new economic opportunity and growth.

Already, just over a week later there is buyer’s remorse from many in the Leave camp as well as those who voted to remain, and there is confusion over what to do next.

 

So what now?

We need to snap out of the haze. Like Baroness Lane Fox I believe we need to accept what has happened and begin to take a progressive view on how to move forwards. In the words of her letter to the Evening Standard “The worst thing to do now would be dwell on the result and not look to the future”. I 100% agree.

Now is the time to take a progressive view, remain dynamic and revert to Entrepreneur 101: remain agile and look for opportunities. It’s easy to look at the current situation and become so overwhelmed with uncertainty and fear that you stop trying altogether. I know that things might seem a bit hopeless right now, but I invite you to look at this from a different perspective: now is the time to make your mark! Take the opportunity to overcome adversity, stare odds which are stacked against you square in the eyes, and say “My business and entrepreneurial spirit will overcome this, this is not going to hold us back.”

There will be challenging times, but also opportunities. As global tech investment firm Atomico stated, some of the largest companies around today were born in tough economic times; “Entrepreneurs are resilient. We’ve seen this over and over again. Microsoft and FedEx started out in the 1973–1975 oil crisis and US recession. Skype was founded in 2002, during what was still the dotcom nuclear winter. Airbnb, Spotify and Uber were born during the 2008–2009 financial crisis. This, if it turns out to be a crisis, will be no different.”

The future is ours, and it’s up to us to make it work in our favour.

Why Brexit Would Destroy UK Tech

 

Two major events are happening in the British tech industry this week – the EU referendum and London Tech Week. Of course, the possibility of Brexit becoming reality has been a hot topic within the opening speeches at London Tech Week, and the statements and statistics put forward have served to strengthen my belief that remaining in the EU is the best option for UK start-ups.

 

The UK is the home of the Unicorn

London Tech Week launched with a keynote speech from Gordon Innes, CEO of London & Partners, in which he stated that “London has become the best city in the world to create and scale tech companies”, and backed this up with figures showing that over $10bn has been invested in London’s tech sector.

London has built a reputation as a global tech hub through innovation and applying the productive benefits of technological advances to other areas of production – such as disability and medical aids, emission reduction and innovative building materials. My concern is that, in leaving the EU, London’s tech start-ups will lose access to many of the factors driving this success.

Currently, Europe is leading the way in producing sustainable start-ups, with European tech companies being valued at 18 times their revenue generation, in stark contrast to the US tech companies, which are valued at an average of 46 times their revenue generation. According to GP Bullhound’s Annual European Unicorns Report, Europe is currently home to 47 billion-dollar digital start-ups – a majority of which (18) are based in London – showing that London truly is the home of the Unicorn Start-up.

 

Brexit would likely destroy London’s ‘Tech Hub’ status.

I am not alone in this opinion, either. Many leading tech businesses have put their names to letters urging the UK to remain a member of the EU. The UK heads of IBM, Microsoft and SAP joined 32 other business leaders in signing an open letter, whilst are among 1,280 business leaders to have signed another and hundreds of tech start-ups and entrepreneurs have signed a separate letter. Former Google Chrome Marketing UK head and founder of the Sup App, Richard Pleeth also shares my sentiments, alongside 87% of Tech London Advocates, as does the highly respected entrepreneur Richard Branson:

 

This does not mean that voting to remain within the EU will mean that there will be no change to the British tech industry, however. Both potential results will trigger change within laws and regulations and tech companies – both start-ups and established businesses alike, will have to make rapid changes in order to keep up. But it is glaringly obvious that a ‘remain’ outcome is less likely to destroy Britain’s technology-driven capital and will mean less disruption for businesses overall.

If Britain was not in the EU, every stage of the process – from Business Development through to invoicing clients – would have been much harder for my business ‘E-tale’. Doing business in Europe and essentially exporting software was easy. We took this for granted until we began working in regions like Russia and Brazil where the level of paperwork and tax info required is out of hand! Brazil have various import taxes that make it really hard for an international supplier to be competitive, whilst Russia is less about the tax and more about the paperwork needed to ever get paid.

The admin costs of just finding out what the trading rules are outside Europe and the US is a cost that most start-ups are unable to bare. However, trading in the European Union was almost exactly like trading in the UK – sharing many of the same regulations and requirements and making understanding the whole process much simpler. In addition to this, having a strong European client base was a huge factor when E-tale was purchased by ChannelAdvisor in 2014.

I am not saying that I would have dismissed the thought of starting a business outside of the European Union, just that it would have been a lot harder, arduous and more expensive to do so. The opportunities for expansion and innovation would have been severely limited by not having access to EU markets and regulations.

For medium to large businesses, the impact of a Brexit result will be damaging, but will not be as devastating as the effects it will have on start-ups and entrepreneurs. New businesses and those still in the planning phase will be left stranded, lost and in need of severe guidance, should Thursday’s result see the UK leave the EU. A Brexit result would severely restrict, and in some cases destroy, those businesses currently starting up in London’s many tech hubs.