Few things about the UK’s divorce from the EU have been clarified since Theresa May triggered Article 50 in March. And as the 2019 deadline is rushing closer every day, uncertainty about the future has become a massive worry for British businesses. Now it seems as if those concerns are set to grow as a new report has revealed that Brexit may damage UK startups’ ability to scale.
Having analysed Britain’s dependence on the European Investment Bank (EIB) and the European Investment Fund (EIF), techUK, the organisation championing the British tech industry, has warned that leaving the EU could make it harder for UK startups to raise money. The report pointed out that the EIF invested €2.3bn in 144 VC funds between 2011 and 2015, which accounted for a third of the investment made by UK VCs. While the British Business Bank may replace some of this funding, the report suggested that it would be unable to match the volume of the EIF’s investment.
But losing the influx of investment from the EIF isn’t the only concern Brexit may cause for British tech companies: the paper also warned that it could mean leaving the EIB. While this was touted during the referendum as an opportunity to see the €10.2bn Britain has contributed to the bank returned, techUK warned that things aren’t especially clear cut. In fact, the country may not be legally entitled to the capital invested in the bank and even if it is the money invested in the bank may not be paid back immediately. In other words: unless the UK retains some sort of membership in the EIB, the country could lose the money entirely or be forced to wait a long time before seeing it repaid and that it will take even longer before startups can see it in the form of future investments.
Following these concerns, techUK urged the government to make it a priority to retain a stake in both the EIF and the EIB. Commenting on the paper, Julian David, CEO of techUK, said: “Losing the EIF risks seriously damaging the ability for innovative new or rapidly growing tech companies to get the funding they need. The case for the UK retaining a piece of the EIF is overwhelming from an economic and practical point of view.”
It seems that just like nature of Britain’s final deal with the EU, the impact Brexit will have on UK startups’ funding remains uncertain.