London may be one of the most innovative cities in Europe but that doesn’t mean startups don’t have reason to be concerned about the future. Following the uncertainties caused by the Brexit vote, VC investment in fintech startups dropped by 33.7% and 91% of SMEs finished 2016 in significant financial distress. Now, in a bid to safeguard themselves against the fallout from Britain’s divorce from the EU, one in five startups are considering opening offices in Europe.
Having surveyed 941technology and healthcare executives from the UK, Silicon Valley Bank, the tech-focused bank, has revealed that while 21% of startups plan to remain in the UK, they are also looking to open new offices elsewhere in Europe. Meanwhile, 11% are considering moving their headquarters to another European country and 1% are definitely doing so. The survey also found that 5% were considering moving their headquarters to somewhere outside of Europe entirely.
And while 62% are planning to stay put and not open a new European outpost, it seems that British startup confidence has taken a beating since the vote. When asked about their outlook for 2017, 36% said they’d become more pessimistic. That is an increase from the previous year when only 1% said their outlook had worsened. At the same time, the number of startups that think their future prospects will remain the same dropped from 41% in 2015 to 36% in 2016 while the number expecting the future to be rosier fell from 58% in 2015 to 48% in 2016.
When asked what Brexit-related challenges startups are facing, 32% said their non-UK employees were worried about long-term opportunities in Britain while 21% said that attracting VC investment was becoming harder. A further 21% said that running a business has become more expensive while 12% have found attracting European talent more difficult and 7% said selling to Europe has become harder.
But all was not doom and gloom, as 89% of UK startups intend to grow their workforce in 2017, which Silicon Valley Bank takes as an indication that 2017 may be a year of transition rather than a year of terminal blows to startup scene: “Businesses are seeing more opportunity than fear, which can only be a good thing,” said Phil Cox, branch president for Silicon Valley Bank UK and head of Europe, Middle East and Africa. In fact, he’s suggesting that the break-up with the EU may create some opportunities “to address concerns about overall competitiveness within the EU by focusing on the factors that drive business innovation and success. The focus will be on simplification, easing contractual arrangements, encouraging investment and competitive taxation.”
With around a month left until Theresa May is planning to trigger Article 50 and begin the official process of leaving the EU, that optimistic sentiment is certainly something we can get behind.