Tech and Brexit: Three-quarters of startups see tough times ahead

And they might be right: analysts predict UK tech spending will be hit, especially in retail and financial services.

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Tech startups are expecting a tough economic climate following the UK's decision to leave the European Union.

Government-backed tech body Tech City UK has surveyed 1,205 people working in tech: 60 percent of respondents are company founders or CEOs, and the companies are mainly startups with 10 or fewer employees. Two-thirds of the respondents are UK citizens, while the top five other nationalities represented are US, French, German, Italian and Irish.

Three-quarters of those surveyed say the business environment may get worse, and just over half say they think it will be more difficult to attract and retain the very best non-UK talent.

A third say they will slow down on hiring new staff, and just under a quarter expect to scale back their planned growth ambitions. Just over half say they plan to raise capital outside the UK in the next year.

Tech bosses also have some demands for the UK's politicians negotiating the country's Brexit: two-thirds say they want to hear a clear message on EU residents' ability to live and work in the country, and 85 percent want to see the UK remain part of the European single market.

Tech City UK CEO Gerard Grech said many workers, entrepreneurs and investors in the digital economy want to remain in the EU.

"Now, as the initial shock at the result starts to fade, an air of pragmatism is settling in. I am also detecting cautious optimism as the possibilities of life after Brexit begin to come into focus. No, it wasn't what we expected. But yes, there are unexpected upsides and very real opportunities," he said.

While Tech City UK described the survey as "cause for optimism", it seems that after the referendum vote to leave the EU most tech startups see hard times ahead. But Grech said the UK's digital economy is growing faster than the wider economy and is creating jobs more quickly. And nearly 40 percent of Europe's tech "unicorns", young companies valued at $1bn, are based in Britain.

Simon Calver, partner at investment company BGF Ventures, said: "Leaving the EU raises lots of challenges for the tech community but they are used to these challenges. It does not distract us from our primary purpose of investing in the most promising companies and individuals with global ambitions that we can find."

Separate research from IDC suggests that the outlook for tech remains grim: after seven percent growth in 2015, European tech spending will remain flat at €707bn this year and grow by just 0.8 percent next year, down two percent.

UK tech spending will see the sharpest slowdown, growing by just 1.3 percent in 2016 and with no growth in 2017. Tech spending in financial services, followed by retail and manufacturing, in particular in the automotive industry will be most affected.

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