EU citizens in the UK after Brexit: How to square the circle
From our partners at PitchBook. Original article can be viewed here.
The clock is ticking, and there are now fewer than 60 days left before the UK is set to leave the EU.
After months of negotiations, a Brexit deal that was overwhelmingly rejected by the UK Parliament and weeks of political infighting, many questions still remain unanswered. Much focus has been put on the potential doomsday scenario of a no-deal departure, but perhaps not enough attention has been given to the impact of Brexit on UK-based EU citizens, as well as the ability of founders to access talent going forward.
Anecdotal evidence, derived from interviews and background conversations with founders and investors during the last two years, suggests that—by far—the two main issues are fear related to a lack of funding and access to talent.
Adding to this, Silicon Valley Bank's "2018 Startup Outlook: UK Report" found that the number of UK-based startups thinking about moving their headquarters to Europe increased from 11% in 2017 to 14% last year. The research also revealed that, while a quarter of those startups surveyed are planning to remain in the UK, they are also considering opening a European outpost.
On the funding front, things are, so far, looking relatively good. The UK retained its position as Europe's leading nation for VC funding, with some €6.7 billion being poured into UK-based startups across close to 1,400 deals last year, per the PitchBook Platform. The issues around talent acquisition and retention are less clear cut, as dissecting and attributing the official figures is much harder.
The people problem
Net migration from the EU to the UK slumped to a six-year low last year, according to the Office for National Statistics. In addition, research from The Open University found that 53% of UK businesses expect problems with recruitment to deepen as the UK leaves the EU. In short, the general expectation appears to be that luring software engineers and other much-needed individuals from abroad is set to become a lot harder once the UK departs, with the severity of the issue dependent on the final agreement reached.
The government appears to have acknowledged some of the existing fears regarding this—and some wider issues relating to the job market after Brexit—by announcing last month plans to waive the £65 per person fee (£32.50 for children) for EU nationals living in the UK to apply for settled status after Brexit. However, while that might address some concerns regarding EU nationals for the time being reports suggest that, currently, talent acquisition from European countries is in a dire situation. The recently announced startup visa, which allows non-UK based founders to set up shop in the country, is aimed at addressing this and intended to make it faster and easier for entrepreneurs to gain a foothold on this side of the channel.
As the March 29 exit date approaches, the question of how exactly and with what sort of deal remains, as of today, a very large unknown. What is clear, though, is that making it harder for both startups and investors to lure talent to the UK will have a detrimental impact, at the very least in the short- and mid-term future. Taking the size and sophistication of the UK ecosystem into account, agreeing on a deal that allows the movement of highly skilled—and much-needed—talent should be paramount.
For more on venture capital and startup activity in the UK, have a look at our London Venture Ecosystem FactBook.