UK Startups Fear the Pain of Brexit

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UK Startups Fear the Pain of Brexit

London-based UK startups are largely unsure whether they should remain in London or move their businesses to mainland Europe if and when Brexit happens, writes Dominic Luca in RudeBaguette. If Brexit ends up taking the UK out of the Single Market for services, London-based tech startups will have to deal with two competing regulatory regimes, as they will not be trading goods and services under the same policies and regulations in place across the rest of Europe, he claims.
A month after the referendum, The Independent reported dozens of start-ups were already relocating to Berlin. Others, like Duco, have opted for Poland; more and more start-ups are relocating to Eastern Europe due to favourable regulations. Estonia, for example, is granting “e-residencies” to foreign startups – British e-residents have already set up 312 companies in Estonia, 40 of which were set up this year alone. TableYETi, a startup that facilitates restaurant payments, is one of those startups – they offer software and hardware solutions and currently work with many EU partners. A no deal Brexit could have terrible consequences on their business, hence why they are taking precautionary measures to ensure they can remain in the single market. This shows that there is growing concern among London startups, and that they are considering all options to remain in the single market and trade within the EU.
London based start-ups are allegedly already experiencing the disadvantages of Brexit. For example, Jamie Oliver’s restaurant business reported higher prices for products imported from Italy, leading to the closure of four restaurants and a focus on international launches.
Start-ups are expected to feel the impact of Brexit on the prices of almost all imported goods regardless whether a “soft” or “hard” deal between the UK and the EU is reached. That being said, there are still startups moving their operations to London, such as Feed a French startup that helps you maintain a healthier diet. This shows there are still startups who think the UK market will still be worth it, even in the event of a no deal Brexit.
According to Fintech Times, 72% of founders in London-based startups say they are happy to stay put despite Brexit developments, but issues will arise when it comes to staffing and finding foreign talent. With so many European employees in London-based start-ups, many have started noticing there are fewer applicants from European countries. In fact, Language startup Bernhard Niesner said talent acquisition from Europe has dried out, as many potential European employees do not feel welcome anymore.
Generating EU funding for London-based startups will also become increasingly difficult, Luca writes. Future financial services relationships between the EU and the UK will be based on a principle called equivalency, whereby the banks need to recognise each other’s regulations. These rules are set to be finalised by 2020, and ultimately mean London based start-ups will be facing more regulations when selling financial services to the EU.
In the event of Brexit, many will have to set up EU-based subsidiaries and/or move teams and capital, and they will need to revisit their relationships with clients outside of the UK to be able to trade within the set regulations of the EU.

Author: Tim Cole
Image Credit: Pixabay

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