Scale Ireland is planning for UK’s post-Brexit ‘Singapore on the Thames’

25 Sep 2019

From left: Conor Gouldsbury, Liz McCarthy and Brian Caulfield. Image: Scale Ireland

Scale Ireland’s founders discuss the impact that Brexit will have on start-up competition in Ireland and the UK – and what changes they’d like to see implemented.

This morning (25 September), Scale Ireland launched its Budget 2020 proposal, which calls on the Irish Government to implement meaningful measures to support the growth of home-grown innovation.

One particular concern that increases the sense of urgency around Scale Ireland’s proposals is the impending Brexit deadline.

While there’s still a lot of uncertainty surrounding what may or may not occur on 31 October, Scale Ireland is advising the Government on how best to prepare for the post-Brexit landscape.

Elaine Coughlan, venture capitalist and member of Scale Ireland’s Steering Group, said: “Regardless of whether there’s a deal or there’s no deal, we will have a UK that’s outside of the EU that will probably take a very aggressive position as to how it’s going to drive regulation and how it’s going to fund its own indigenous businesses. That’s going to be right on our doorstep in competition with us.”

‘We don’t know whether we have a deal or no-deal Brexit, but we do know that we have a UK that’s uncoupled from the policy environment that we are tied to’

Coughlan cited this as a reason for why it’s important for the Government to sort out any issues with the Employment and Investment Incentive Scheme (EIIS) as soon as possible.

‘A very attractive place to go’

Coughlan said that Ireland’s current EIIS is not nearly as competitive as similar schemes in the UK. She noted that before the UK’s Enterprise Investment Scheme (EIS) was implemented, the nation was not seen as a nation that fostered the foundation of start-ups, but the introduction of new measures “propelled start-up founding [in the UK] to top 2 in Europe”.

“We have got to make sure that EIIS is targeted at innovation-driven businesses. I think with Brexit coming down the line, we will have a much more aggressive policy environment in the UK, more than likely.

“We may have a ‘Singapore on the Thames’, where they will reduce regulation, they will open the rules in terms of what, and how, they fund … So we don’t know whether we have a deal or no-deal Brexit, but we do know that we have a UK that’s uncoupled from the policy environment that we are tied to.”

Coughlan added that this competition is “going to make the UK a very attractive place to go”.

What we lose when companies move to the UK

Scale Ireland’s chair, Brian Caulfield, pointed out that there are already a number of Irish companies heading towards the UK.

“Are companies moving to the UK? Yes, they are. But the numbers are small. There’s another important affect that has. Irish companies can access UK Enterprise Investment Scheme incentives. An Irish company can raise money in the UK under EIS but, in order to do that, they have to locate some business functions in the UK.

“What we’re seeing is Irish companies saying, ‘Okay, well I’d like to be able to access EIS and the huge amount of capital that’s available under the UK’s EIS, so I’m going to put my sales function or my tech support function in the UK’.

“It’s not necessarily that an Irish company moves lock, stock and barrel to the UK, but it locates a specific business function there.”

Caulfield noted that when this happens, whether it’s 10 engineers moving to the UK or 10 members of technical support, Ireland is losing 10 potential taxpayers.

Scale Ireland’s funding plan

Head of Scale Ireland Liz McCarthy explained how the non-profit group is funding its operations to lobby the Government on these issues ahead of Brexit and beyond.

“To date, we have had contributions from within the ecosystem with the phased approach we took,” McCarthy said.

“Over a year ago now, flying under the radar, we did a feasibility report to understand if we could leverage existing support to do this policy work and take on the role of a voice for start-ups and scale-ups, or whether there was a need for a new organisation.”

The Steering Group decided that there was indeed a need for a new organisation, and so Scale Ireland has had staged funding to enable it to get to the point that it is at today, launching its pre-Budget proposal.

“We are moving into a new fundraising phase where we’ll be looking for support from ecosystem contributors, people who have successfully exited as start-up founders and are passionate about those coming behind them,” McCarthy said.

“We will be engaging with multinationals and corporates, professional services firms who are interested in getting engaged with the start-up ecosystem.”

Caulfield added: “To be completely explicit, we did get some seed funding from Google at the beginning of the project. They’ve been an exceptional partner and they haven’t sought to exercise any editorial control whatsoever. The bulk of the funding for the current phase has come from exited founders for the most part.”

Kelly Earley was a journalist with Silicon Republic