Phil Cox from Silicon Valley Bank asks how tech business leaders in his network are preparing for Brexit, whatever way it comes.
If there’s one thing I’ve learned from years of working with tech entrepreneurs, it’s that they’re a resilient bunch. So I’m confident they’ll overcome the next big challenge: Brexit, deal or no deal.
While a deal would avoid a disorderly exit from the EU, it’s clear from conversations that I have with tech leaders up and down the country that they’re at least planning for a no-deal scenario.
This is especially true among fintech businesses. Take money transfer service Azimo. Michael Kent, its founder and CEO, is particularly concerned about the potential loss of ‘passporting’ rights, which allow them to sell products and services anywhere within Europe under one licence. He said: “In the event of Brexit – be it hard, soft-boiled or poached – it seems very unlikely that financial services ‘passporting’ will be maintained. Should our business remain solely regulated in the UK, it’s not clear how we will be able to provide services to the 450m or so continental European customers.”
To protect itself, Azimo is setting up an office in an as yet unnamed European city, and it won’t just be a tiny operation to tick a regulatory box. Kent said: “Longer-term, if the UK is outside of the EU, we’ll need to have senior management, product people, engineers, compliance staff and a finance function within the bloc.”
Other tech firms are also readying themselves for a loss of passporting rights. Zego, the pay-as-you-go insurer, has already opened an office in Dublin for that very reason.
Harry Franks, the London company’s co-founder and chief commercial officer, said: “We just don’t know what’s going to happen, so we have to prepare for the worst. Anyone thinking about working internationally is going to be forced to move, and we’ve already spent thousands of pounds getting prepared.”
Kent said Azimo has also taken other preventative actions, such as diversifying its network of banking partners across Europe. “Having more partners is always more complex and expensive to manage and there are fewer economies of scale, but it mitigates potential risks,” he said.
Though the challenges may be particularly acute for fintech firms, it’s not the only corner of UK tech braced for potentially major changes. Biotech and life sciences is another.
“In the longer term, if there is no deal, there is a risk the UK will no longer be a significant market for biotech,” said John Beadle, CEO of PsiOxus, the Abingdon company that develops viruses to deliver medicines to cancer patients. “I think the larger pharma firms are less likely to invest in the UK, and we would actively avoid manufacturing in the UK.”
Getting hold of top talent is a perennial challenge for tech companies, and many are concerned the impact a no-deal Brexit would have on recruitment. PsiOxus, which employs many EU nationals, has continued to recruit staff based on their skills rather than their nationality, but Beadle said: “Access to and retention of high-quality scientists is a big concern.”
Getting on with business
While not all companies are yet spending big to prepare for a no-deal Brexit, they do have contingency plans in place.
Among them is Black Swan Data, which uses data science to help businesses identify patterns, spot trends and make predictions. Steve King, co-founder and CEO, said: “We spend a lot of time talking to other CEOs and we’re all in the same place, which is that until we have more detail, all we can do is prepare.”
Even tech firms that operate solely in the UK are on their guard. Simon Hansford, CEO of Farnborough-based UKCloud, which provides cloud services to the public sector, said the business is “making plans at both board and operational level” to, for example, anticipate longer lead times for hardware imports.
Of course, we all hope a deal will be done to ensure that the UK’s exit from the EU goes as smoothly as possible. But if it doesn’t, I’m confident UK tech will continue to thrive.
As Azimo’s Kent said: “Technology entrepreneurs are eternal optimists. They’re going to always find great opportunities whatever happens.”
By Phil Cox
Phil Cox is head of EMEA at Silicon Valley Bank (SVB). Since joining in 2009, he has led SVB’s UK branch banking business and its expansion into UK technology lending.