Why London's startup status should be safe (for now)

Written by Nic Wistreich on . Posted in articles

The uncertainty following the Brexit vote, has been met with talk of startup investment falling through, cancelled Horizon 2020 (the £88bn EU innovation and tech fund) bids, and a sinking Sterling, all lead to a sense that London could soon lose it's position as arguably Europe's startup capital. Loss of access to the single market, which will happen unless the UK government agrees to maintain free-movement, or the other 27 EU member states agree to create an exception on the EU's founding principle; London would be an unhelpful location for anyone selling or operating across the EU.

Many startups are considering their options, given how competitive and fast-moving the market is. However, London still has at least two advantages, and sounds like it is be about to get a third.

1. The city

"This is the most incredible place" an Italian told me on Friday night. The week before a Spanish neighbour explained "I am heartbroken because I thought this was the best place in the world, the most tolerant place in the world." Still, if London can keep sufficient autonomy from government, get further devloved powers, it's place as a leader in creativity, culture and rich multiculturalism should be safe. We have a Muslim mayor marching on Gay pride. All of this makes for an attractive (if expensive) place to work, and as a global tech startup HQ, there is, at least, minimal gun crime.

2. The language

While sites targeting particular countries and regions will use a local language, for apps and sites targeting Europe and the US, English is commonly the first language used, often multi-lingual versions don't come until later. With America set to overtake the economic power of EU-minus-UK, then this is unlikely to change soon. Britain will always have an advantage over other European cities beyond Ireland, for this reason. Not only is the country full of good (and often under-employed) writers, the creative sector as a whole has a disproportionate share of Oscars, Grammies and Emmies.

3. Commercial property costs could go down  40%

Wth most of the property investment funds ceasing trading to meet demand for withdrawals, some estate agents have forecast reductions of up to 40% in the cost of commercial space as they revise down expectations of demand. Indeed with the ability to easily rezone commercial properties for residential use, introduced by the Coalition to attempt to deal with housing shortages, we could see residential costs fall as well. Cost of living and office space are perhaps two of the strongest advantages other European startup capitals have.

But there are potential issues:

Impact on labour & talent

While it's true that the rise in racism and hate crimes could put off talented people from wanting to move to the UK to work, none of the Leave campaigners have ever suggested ending migration for skilled or needed workers; no-one has suggested the end to migration, just a different system of it. However, there will be less cheap labour around, which could have it's consequences with people moving their companies to where the cheap yet skilled labour is instead. 

Madrid, for instance, has huge numbers of unemployed digital people, would be in the EU, with a widely-spoken language and low cost of living. But this decision won't be made for two years or more, and relocation in the event of a bad post-Brexit settlement can still happen (as Lush are already doing).

We forget that free-movement was intended to protect native workers: would we rather a company set up in the UK that employed mostly migrant workers, but who spent most of their money here – and paid taxes here (£25bn over the last decade) – or that they set it up in Poland and we saw none of that money? I imagine that depends on where their taxes are spent - on stretched local services, or on central government management?

Science, tech & innovation funding

What seem immediately concerning is the collapse in H2020 bids - and the impact this will have on universities and micro/SMEs. Don't get me wrong, my limited experience suggests the fund is often abused and much needing reform, but it has provided key funding while successive governments have wavered in their support. British technical excellence and invention is something of national pride, and a key driver of the economy – and support for these areas need their income securing. The EU funded the huge new Graphene centre, for instance, and has backed countless startups, and the technology they use. Funding from the EU helped me undertake a number of business supporting projects including Honeycomb in Norther Ireland the Republic., and in Copenhagen and Sweden. If we lose our academics to countries in the EU which can still get this funding, we'll be feeling the effects for many decades. We would risk falling far behind the rest of the continent in the sorts of innovation that offer perhaps our best hope of recovering our economy and paying off the debt.

Political uncertainty

Contender to be the next PrimeMinster ('the Conservative's Corbyn' some call her as she sits towards the tea-party wing of the party), Andrea Leadsom has called for BBFC-style website verification where anything published online first would have to be approved by a regulator like the film censors to agree if it is legal and what age it was suited for. Given this would require Facebook and Twitter to be resubmitted several thousand times a second, the risk of such erratic legislation would give any web or digital startup concern.

Brand London

But, if London becomes seen as less a 'City of the World' – as it long has been – and more the 'Capital of Little England/Britain', then we're in trouble. It's an incredible place to visit, live and work, in spite of the costs – but we're next to a continent full of incredible cities, who can each claim, as EU members, to be more internationalist, more cooperative and less arrogant than the UK currently appears to the world. Farage's rant in the EU parliament may take a long time for the world to forget. So an urgent priority might be for the city - as with other pro-Remain cities and regions - to clearly and boldly declare to the world they are more committed to international solidarity and cooperation, and to rejecting all intolerance and hate crime, than ever. Leaders can acknowledge that much may change politically and in law, but that this idea, this thing we take so much pride in, isn't up for discussion.

I apologise for not talking about other regions and cities in the UK and their specific issues in writing this: especially after such a rejection of London-centric thinking in this referendum. However, it's where I live and work, it is battling with being 60% opposed to this Leave vote and it's the powerhouse of the country, contributing around a third of tax revenue from around 10% of the population.