Will Brexit damage the Irish and UK tech economy?

27 Jun 2016132 Shares

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What will Brexit mean for the Irish and UK tech economies?

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As the dust settles on one of the most momentous decisions by a people in living memory, John Kennedy asks what Brexit will mean for the tech economy across Ireland and the UK.

On Thursday 23 June, we knew it would be a close-run thing but, as most people switched off their lights and turned over for a night’s sleep, few realised they would awake on Friday to a new world order.

You see, no one could believe it would swing in the direction of a narrow ‘Leave’ by 51.9pc of British voters. In the cold light of day, reality dawned, and nothing is ever going to be the same again.

Why on Earth would a nation want to harm itself in this way, most of us asked. And what will this mean for everyone else?

‘Irish start-ups may all revere Silicon Valley and have ambitions of going there some day, but the road to San Francisco usually cuts through places like Birmingham, Manchester and Leeds first’

It is no comfort to many readers in Ireland or the UK that, according to post-referendum polls, the majority of those aged between 18 and 24 voted to remain. And those were the most poignant voices of them all as reaction spread over the weekend. Hurt, betrayal and what the hell just happened?

In university towns like Oxford and Cambridge ‘remain’ attracted 70pc and 74pc of the vote, respectively.

You get a sense of injustice as you realise that those who will have to live longest with the decision are an entire generation who had gotten used to the idea that they could live and work, experience life, marry, build businesses and thrive in any one of 27 other countries nearby.

There will be no Erasmus, there will be no further Horizon 2020 R&D funding; it ends here. It may take months and years to unravel the UK from the EU apparatus, but a lot of hopes and ambitions borne by collaboration with academics, start-ups, investors and many other bright and ambitious inventors of tomorrow have their way clouded and shrouded.

It won’t only be UK workers, innovators and entrepreneurs who will be affected. It will be their counterparts in other EU countries who wanted to work and collaborate with them too.

The harshest lesson of all will have to be embraced by the political leadership in Europe.

Many of those who voted to leave did so because fears about immigration and a misguided nostalgia for a patriotic past were stoked by pundits – not leaders – like Nigel Farage and Boris Johnson. But let’s not forget that there is also a sense of payback and injustice that extends all the way back to the bleak days of Thatcherism in the UK when once-prosperous, hard-working communities were blighted by privatisation and policies designed to make the rich richer.

The core lesson that Europe’s leaders need to understand is that the growing gap between the rich elite and the declining middle classes, and the growing sense that those in power are out of touch with ordinary people is a tinder box.

People, when they can vote – and they will – will strike back. Ireland’s minority government is an example of this. Lose the trust of the people at your own peril.

Over the weekend, millions of people signed a petition for the UK to vote again on staying in the EU. Will this happen? Unlikely, because a democratic vote was taken on the back of a dangerous political gamble by a weak prime minister and those birds have come home to roost.

London calling

So what will Brexit mean for the innovation economies that every country in Europe – including Britain, which was at the forefront of this – are trying to establish?

The UK, and London in particular, is the central hub of venture capital investment in Europe. It has its own initiatives to boost the tech economy which has grown up in university cities across the UK, most evidently in places such as Shoreditch in London, and through efforts like Tech City UK.

It is hard to fathom whether Brexit will have an impact on London’s power as a magnet for investment – most likely not. But you can be guaranteed that every single one of the UK’s start-ups will now have the Single Market denied to them. Even if not entirely inaccessible, there will still be frictions they hadn’t previously accounted for.

For Ireland, which has been building its innovation economy steadily during the last 16 years, the spectre of borders and customs barriers is a very real concern when it comes to trading with the UK. Irish start-ups may all revere Silicon Valley and have ambitions of going there some day, but the road to San Francisco usually cuts through places like Birmingham, Manchester and Leeds first. The existence of a nearby population of 64.1m English-speaking people with close cultural and historical ties makes the UK a no-brainer for any tech company aiming to scale up fast.

Irish technology services companies such as Version 1, for example, have been growing fast in the UK through acquisition. Irish entrepreneurs like Inspirefest speaker Jules Coleman, who sold her start-up Hassle.com last year for €32m; and Jane Ní Dhulchaointigh, the inventor of the Sugru mouldable glue technology, have both found London an amenable location for growing their businesses. Just last week, we reported on how sustainable start-up Obeo raised €350,000 to fuel its expansion into the UK market.

Not only this, but many core start-up programmes like Techstars regularly invite Irish start-ups to join their London programmes and last week Brent Hoberman’s Founders Factory accelerator pointedly encouraged Irish start-ups to apply to join its cohort.

In recent weeks, 15 Irish businesses made it through to the finals of Richard Branson’s Virgin Media Voom start-up competition. It was the first time Irish founders were invited to the competition and their impact was felt strongly.

After Brexit, what will happen to all of this activity? Most likely it will continue because it has to. The geographic, economic and cultural ties are too strong for it not to.

The talent question

As the news emerged Friday, both the IDA and Enterprise Ireland were quick to reveal they had plans in place, however regretful the Brexit decision was. Enterprise Ireland revealed it has a package of supports standing by to bolster Irish exporters in the wake of any changes to trading conditions.

It is also likely that Dublin could benefit from a surge in inward investment with organisations like Morgan Stanley reportedly considering relocating 2,000 staff from London to either Dublin or Frankfurt.

Indeed’s EMEA economist Mariano Mamertino told Siliconrepublic.com that Ireland’s position as one of the last English-speaking countries in the EU could play into the nation’s hands, making it a magnet for tech talent keen to work in the country’s growing tech, biotech and financial services industries.

Conversely, Ireland could also prove attractive for thousands of UK citizens who may find their innovation industries compromised by Brexit, and who are keen to take part in well-funded, EU-backed science programmes, or to join and create start-ups with access to the single economy, or hop aboard fast-growing multinationals.

That may be too simplistic and interpretation, and there is also a danger in indulging in any kind of schadenfreude because this is an existential crisis that will potentially engulf all remaining 27 members of the EU. Not only that, but without the EU watching over its shoulder the UK is free to do what it likes with corporation tax while Ireland could bear greater scrutiny from Brussels watchdogs.

A lot of things now look uncertain.

Why do we innovate?

We innovate because we want to make life better and improve things. Innovation comes in many forms. It can be scientific, it can be technological, it can even be philosophical or ideological.

The ties the bind the UK and Ireland are hard to define, but they exist in culture, memory and ties of blood. Ireland and the UK made a joint application to join the EU in 1973 after years of being rejected by the then-EEC. Remember, this was at a time when the Troubles were raging in Northern Ireland.

Let’s not also forget that the UK loaned £7bn towards the international rescue package for Ireland in 2010 because the strong trading relationship between Ireland and the UK was too important to disrupt.

The UK is an innovation leader with some of the world’s most prestigious universities and a pedigree of innovation that is world-renowned.

For decades back, as far as Independence, Irish people benefited from the freedom to travel and work and live in the UK unimpeded.

Will Brexit mean the end of that? Let’s hope not.

The road ahead will be defined by trade negotiations. If Ireland truly wishes to be an innovation leader then it must explore how it can continue to work with the UK in a way that will foster collaboration, boost start-ups and enable the free flow of talent.

We innovate because, after decades of struggle, troubles and shared experience, the instinct is that life has to get better and constantly improve. If the UK goes ahead and Brexit happens, we need to remember the ties that bind and those core reasons why we innovate.

Ireland and UK image via Shutterstock

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Editor John Kennedy is an award-winning technology journalist.

editorial@siliconrepublic.com