Given that London is home to almost a third of all tech startups in Europe, it seems clear that Britain’s got talent. However, new research from Balderton, the venture capital firm, has revealed that its tech crown may be at risk if Brexit makes it harder to attract entrepreneurs and employees.
Based on official figures and interviews with business leaders, the study show that not only did 42% of new UK tech startups have at least one foreign founder in 2015, but more than a fifth of these startups’ employees also came from abroad. So it’s hardly surprising that 82% of the senior staff and executives surveyed are concerned about their ability to access a Europe-wide talent pool once Britain leaves the EU.
And according to Balderton, they’re right to be anxious. If the government pushes ahead with a hard Brexit, the VC firm estimates that the cost of recruiting foreigners would increase, especially if the pound remains week. This, combined with longer hiring times, would make it less attractive for tech talent to opt for a future on the British Isles.
Today, companies hiring Europeans can do so within three weeks. Yet, this period could increase considerably once the UK leave the EU. If a British startup hires someone from outside the EU today, that candidate must apply for a Tier 2 visa, a process that could increase the hiring time up to 16 weeks. Once Brexit occurs, Balderton warns that recruiting from the European mainland could take just as long. “Tech companies hire very quickly and grow quickly,” said James Wise, partner at Balderton. “Hiring in a couple of weeks is the norm, so having to go through visa system that would take 16 weeks would severely diminish our ability to be competitive.”
The risk of increased recruitment costs and longer hiring times could see the share of European tech startups that are UK-native slide from 31% to 24%. At the same time, Balderton estimates that France and Germany could see their shares rise from 19% to 23% and 18% to 22% respectively.
The research comes as the Supreme Court kicks off its four-day hearing about whether parliament or the government has the authority to trigger Article 50. This study certainly suggests that entrepreneurs around London’s Tech City have every reason to watch the proceedings carefully.