Tech gets the Brexit blues as confidence slides

But will the UK's new government even care what the dotcom crowd thinks, anyway?
Written by Steve Ranger, Global News Director

Tech companies in the UK are feeling less positive since the Brexit vote.

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Tech companies' confidence in the future has plunged since the UK voted to leave the European Union on 23 June.

While seven in ten (70 percent) of tech company executives are 'overall positive' about the UK tech sector's potential for growth over the next two years, that's down from 93 percent in March 2016. And only 20 percent are 'very positive', down from 52 percent in just four months ago, according to a survey by industry body techUK.

The survey of techUK members, conducted in July 2016, is based on the responses of 237 tech business leaders, which the industry group said included a "representative spread" from micro tech businesses and SMEs, through to large companies. The survey covers both UK-based and international companies with significant UK operations.

While Brexit supporters have pointed to trade outside of the EU as a big opportunity for the UK, it seems that tech companies do not share that enthusiasm: just one in five companies (22 percent) were positive about the impact of the vote to leave the European Union on non-EU exporting.

And half of the survey respondents said the vote to leave would have a negative impact on foreign direct investment (49 percent), capital investment (48 percent), and R&D spend in the UK (48 percent) over the next two years.

Three-quarters of the companies surveyed with a European headquarters had located it in the UK. The top three European markets for respondents were Germany (41 percent), France (36 percent), and the Netherlands (17 percent).

Julian David, CEO of techUK, said: "this substantial drop in confidence clearly demonstrates the need to be vigilant to immediate and pressing concerns faced by tech companies."

According to techUK, access to the European single market must be the primary objective of any UK negotiation, because it allows tech firms to compete for business on equal terms across Europe.

Smart immigration

The tech sector has thrived because of its ability to attract the best skilled workers and entrepreneurial talent from across Europe, said techUK, adding that if the UK can no longer benefit from free movement then a new 'smart immigration' policy needs to be put in place "that prioritises the needs to the UK's fast growing and high value tech sector".

TechUK isn't alone in this: a recent report from the House of Commons Business, Innovation, and Skills Committee warned that UK tech businesses risk missing out.

"We could have led on the digital single market, but instead we will be having to follow. The government must address this situation, to stop investor confidence further draining away, with firms relocating into other countries in Europe to take advantage of the digital single market," said the committee's report.

"The government must outline what measures it is taking in the immediate future to support policies connected with the digital economy, in the light of the referendum on the UK's membership of the European Union, and must ensure that the country's digital economy remains successful and innovative," the committee warned.

Cultural divide

How much the new government intends to listen to tech companies remains unclear, but a recent analysis of the brands favoured by voters on either side of the Brexit question suggests quite a large cultural divide between the two groups, which may have a bearing on its attitude.

Those voting to remain in the EU tend to favour tech brands like BBC iPlayer, Instagram, Spotify, Airbnb, LinkedIn, and Twitter, while leave voters favoured rather more traditional brands like HP Sauce, Bisto, and Richmond sausages.

A government where many of the leading roles are occupied by pro-Brexit politicians may be less interested in the demands of a mostly metropolitan tech elite than previous administrations, which have done much to promote UK tech companies and the modest but growing tech hotspots of east London and Cambridge.

As one commentator noted, the new Prime Minister may have bigger things to worry about "than the tribulations of Shoreditch startups in sourcing Hadoop programmers".

However, ignoring the tech industry wouldn't be a smart move: these are highly-mobile companies that are already being wooed by other European cities. A wiser approach would be to reassure them and try to figure out how to get these companies to start generating jobs outside of the big cities and helping to spread the prosperity which other parts of the country beyond the capital have found elusive.

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