But how well-founded is such optimism? And what needs to happen to mitigate the risks? Those were some of the questions put to a panel of leading lights from London’s technology scene at a standing-room-only event at Second Home, Spitalfields last Thursday evening.
Filling the talent gap
“We are at such a critical point now,” said Reshma Sohoni, partner and co-founder at Seedcamp, kicking off proceedings with a note of caution. “A lot of the things we decide on policy over the next two years will really impact our future [as a tech hub]. Of the top things we’re worried about, number one is talent. I don’t know how we’re going to match Brexit with free movement of people, but we desperately need free movement if we’re going to continue the momentum. We’ve already seen stats around Europeans applying for tech jobs plummet.
“Second, the majority of people think [the UK tech scene] has an advantage in fintech. Well that goes away very fast if we don’t have “passporting” rights [which enable financial services companies based in one EU/EEA country to export to another]. In terms of regulation for our [fintech] companies being able to operate across 27-plus countries, [that’s] crucial,” she argued.
“The third one is capital. 40 per cent of capital in UK funds, across private equity and venture capital, comes from outside the UK. And if that…dries up… that’s a pretty big problem. So I think policy decisions particularly around these three things will have a massive impact on our momentum and our future outlook.”
Light at the end of the Brexit tunnel
Richard White, CEO of property-tech startup Goodlord, was rather more upbeat in his assessment: “We’re pretty confident that no matter what happens [with Brexit], as a startup and as a community, we’ll find a way through it. That’s what we do. There’s a light and dark side to everything, and startups will use [the situation] to their advantage.”
Similarly, Index Ventures’ director of talent Dominic Jacquesson, said on the overall question of London’s tech scene in 2022, he was “absolutely convinced that the startup sector is going to be a lot bigger in five years. It’s just a question of the direction of travel: will we have peaked and be starting to be overtaken by other centres?”
That depends primarily on access to talent, he continued. “It does fundamentally come down to government policy on that question. I was very concerned pre-election with the noises coming from Government and some of the conversations I was having. A lot of business felt there was a complete deafness to their needs to keep the economy going. I do feel a lot more optimistic now that immigration targets are [likely] to be softer. I think there will be some sort of target introduced, but it might be more like eliminating the deficit – some point off in the future. But [as a sector], I do think we are some way down the pecking order in our ability to lobby government effectively. We need to get better at that.”
Funding to grow along with the digital economy
When moderator James Ticomb, technology editor at the Telegraph, asked what the Government could do to make the sector’s life easier, Sohoni acknowledged that the Government had done “an incredible job” since 2010. She said: “With EIS [the Enterprise Investment Scheme] and SEIS [the Seed Enterprise Investment Scheme], they’ve transformed angel investing in the UK and it’s been such a critical part of making us be a centre of gravity. [Tier 1] Exceptional Talent Visas [which Tech City UK can endorse] were also in the right direction. So I guess it’s all about not rolling those back.”
While Jacquesson added the EMI Share Option Scheme to Sohoni’s list of UK policy successes, Cheery Freeman, co-founder of LoveCrafts, a leading growth-stage startup, urged Government to be more proactive around later stage funding initiatives.
“In terms of scale-up funding, even though we’ve had some enormous successes in the last couple of years, actually relative to the States, the level of scale-up funding [here] is minute,” she said. “If we want to have that sort of ambition here, we need to look at what can be done to increase incentives for larger rounds with later-stage funding.”
She also asked for clarity from Government on Brexit as quickly as possible. “Particularly when you’re making big decisions like where to put your new warehouse – in the UK, Germany or Poland – it’s really important to understand what’s going to be happening.”
Sohoni stressed that there was little time to waste. “Other cities are not stagnant,” she said. “[The French] are gearing up to attract everyone to get on the Eurostar one-way. Amsterdam has a bunch of us going down constantly advising them on what they can do better. These are pretty well known policies. They’ve actually studied London and the UK, and seen the incredible impact, [and] it’s not hard to copy. We’ve got a few years’ advantage… but we can’t rest on our laurels,” she said.