What would Brexit mean for tech startups in the UK?

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If you listen to the mainstream media in Germany and the UK, you would think that Brexit is a done deal and definitely going ahead. Only a few question the results and the need for getting such an important decision past parliament first, where a majority is expected to block a potential move towards Brexit.

Many well known brands were in the Remain camp but what would Brexit mean for tech startups?

Less funding

If you are a tech company working with cutting edge technology or an art organisation, university or research body collaborating with other EU partners, then access to several big EU funding pots such as Horizon 2020 would no longer be available to you within a couple of years. This might not be the case if EU officials decide to make some special arrangements for UK research bodies and offer concessions on the funding front, but judging by the way senior European politicians have reacted to the unexpected news of the EU referendum, this doesn’t look very likely right now.

Horizon 2020 is the biggest EU Research and Innovation programme ever with nearly €80 billion of funding available over 7 years (2014 to 2020). Some of the projects get 70% of their costs funded, which is a healthy cash injection for any company seeking to innovate whether small or big.

With investors pulling out of the UK as well, overcoming your cash flow crisis and lack of equity will become even more challenging. What will happen to cross-border equity crowdfunding on platforms such as CrowdCube? In the US equity crowdfunding is not very big, because every state has its own legislation.

Andreas Haug, co-founder and partner of e.ventures, told Tech City News: “There has already been a more selective approach to venture capital investment around the globe in 2016 and Brexit pushes the UK further back in the list of preferred investment regions.”

Entrepreneurs on the move

Why would you want to launch your new business in tech hubs like London, Brighton, or Cambridge, which despite being fairly liberal and forward thinking are in a country where an apparent majority has decided that it would be a good idea to make it a bit harder for cross-border movement of clever geeks, makers, bakers, and money shakers? Apart from that, commercial spaces and living costs have been more expensive and sparse compared to other EU tech hubs. Recruiting high-calibre international talent to the UK might become increasingly more difficult as well.

A few major companies including Vodafone have already announced that they might have to move their office to outside the UK.

Data protection law

Well, if red tape in the EU was one of your bugbears then this might cheer you up. There is a new EU directive that governs privacy coming into force in 2018 and if Brexit goes ahead as swiftly as most European politicians want it to happen, then the UK might not need to follow that. Instead, it can come up with its own law that suits whoever is in power and makes the rules. In reality the UK will probably adopt the same directive to prevent any additional administrative headaches that companies will already encounter as a result of Brexit.

Would we have to wait and watch from the outside what happens to the EU Data Protection Reform for Big Data if Brexit happens?

Exchange rate implications

For tech companies that import materials and goods from abroad, the weak British pound is very bad news for profit margins. However, for businesses in the services sector this means that foreign clients might suddenly find them more affordable in the short term.

What happens in the long term remains to be seen as there are still a fair few known unknowns. One thing is fairly certain: access to the Digital Single Market for the UK is now looking less likely unfortunately.

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