Brexit-related concerns remain key for UK tech, says UK gov report

Two out of the top three challenges facing tech companies in the UK’s top two tech clusters are related to Brexit, according to a UK government-backed report, and for much of the rest of the country.

That at least is the only possible conclusion from the release today of Tech Nation 2018, the UK’s annual state of the nation’ report on the country’s tech sector. This year’s survey interviewed 3,428 people members of the UK tech community, including founders and workers in tech companies, but has been heavily spun to de-emphasise the effects of Brexit on the UK tech industry.

The report stated that the top three challenges in London and Cambridge (which contains the world-renowned ‘Silicon Fen’ tech cluster) were:

1. Access to talent (which will be affected by immigration rules before and after Brexit)
2. Cost of living
3. Brexit

Cambridge’s were:
1. Cost of living
2. Access to talent (again, affected by Brexit)
3. Brexit

Outside of London, once again, two out of the top three main concerns would be affected by how immigration will play out before and after Brexit.

In the rest of the country, access to talent was cited as the most common challenge – affecting 83% of the UK’s regional tech clusters. Access a funding was a top 3 challenge in 49% of clusters and bad transport links were also cited.

Funding is clearly also Brexit-related, given that funding from the European Investment Fund has collapsed since the Brexit vote.

The European Investment Bank has slashed deals with UK VCs and private equity groups by more than two-thirds, with no equivalent funding from the UK government in sight.

The massive cut pushed the UK out of the top spot at the main recipient of EU venture funding, which is the single largest source of early-stage capital in Europe. France and Germany have now overtaken the UK as the main recipients of capital from the European Investment Bank. UK VCs have expressed concern that the loss of EIF funding will have a “significant” impact on funds.

However, you probably won’t get that impression from the way the report is being pitched to the media at a lavish launch in the centre of London today. Instead, the report is filled with heady statistics about the UK’s booming tech industry.

The report also makes absolutely no mention of the effect of the UK leaving the EU’s Digital Single Market.

Despite dampening down the effect of Brexit on the UK tech industry, the report oddly highlights that tech companies must continue to draw talent from outside the UK, even as the UK government continues to argue about what kind of Brexit it wants and has been embroiled with the Windrush immigration scandal.

The Tech Nation survey found London tech startups have the fourth most international workforce in the world, behind Singapore, Berlin and Chicago, with 54% of workers born outside the UK.

In other words, with over half of London tech workers born outside the UK, Brexit and its impact of the future immigration status of much-needed tech talent will continue to overshadow the entire issue.

The report also found that more black, Asian and ethnic minority workers are employed in London’s tech scene than across the UK in general (15% v 10%).

It will hardly be of any succour them then that a recent report by the United Nations ‘special rapporteur’ on racism found that Brexit has contributed to an environment of increased racial discrimination and intolerance. Other UK-based reports say there’s been a sharp rise in reported hate crimes since the EU referendum.

And over 1,000 young Eastern Europeans who took part in study by researchers from the universities of Strathclyde, Plymouth and Durham, found increasing levels of racism and xenophobia in their neighbourhoods since the Brexit Referendum.

Hardly the welcoming environment Britain needs to fill the many jobs in tech right now.

The rest of the Tech Nation report outlines how the UK’s large tech industry, which has benefitted from the access to talent afforded by EU membership, continues to grow. However, the report can hardly claim independence from government since it was launched and backed by HMG’s Digital Secretary Matt Hancock.

The report’s further claims, which are not independently verified, include:

  • The UK was in the top three countries in the world for total capital invested in digital tech companies in 2017, behind the US and China.
  • UK tech companies have more foreign customers than companies in Silicon Valley. In London, 33% of tech company customers are based outside the UK, compared to 30% in Silicon Valley and 7% in Beijing.
  • Digital tech companies in London are “the most connected in Europe”, second only to Silicon Valley for international connections. Twenty-five per cent of entrepreneurs across the world report having a significant relationship with two or more entrepreneurs in London, compared to 33% for Silicon Valley.
  • London tech startups have the fourth most international workforce in the world, behind Singapore, Berlin and Chicago, with 54% of workers born outside the UK.
  • Tech communities across the UK are “highly optimistic” about the growth prospects for digital tech companies in their local area, both in terms of scale and number of businesses
  • Tech is expanding 2.6x faster than the rest of the UK economy
  • Turnover of digital tech companies grew by 4.5% between 2016-17 compared to UK GDP which grew by 1.7% over the same period
  • Digital tech sector worth nearly £184bn to UK economy, up from £170bn in 2016

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