The biggest and most pressing concern for UK startups in the wake of the Brexit referendum result is what will happen with free movement, according to the business website TechCrunch.
Interviewing startup founders a month after the Brexit poll, it found many of them worried about the impact on existing non-UK EU staff and the prospects for future access to a Europe-wide talent pool.
The businesses also reported a slowdown in decision-making with overseas partners and investors, as entities outside the UK grapple with what Brexit means for them.
Drop in demand
The website visited the same founders in the immediate wake of the poll result, when many of them expressed shock, disappointment and concern for the future. One month on, that immediate shock had eased. “Generally speaking, things have returned to normal-ish for the startups we spoke to — with some even reporting record summers,” it reported.
But other businesses spoke of a small drop in demand with one, a currency exchange startup, attributing its dip to Brexit-based uncertainty. Another founder noted having to absorb a rising salary bill on account of paying some of their staff in euros. A third recounted having to help a supplier by covering 75 percent of sterling’s value drop after the supplier’s margin was all but wiped out.
The same business also said it lost out on a potential hire, after being outbid by a startup in another European country. The rival startup was able to offer a higher salary because of the pound being so low.
The picture was not entirely negative. UK startups are now cheaper to foreign investors, and if the UK economy heads for recession — with the accompanying knock-on effect on rents and house prices — the cost of living in London might become more affordable.
But the founder who suggested this also stressed that the huge negatives of recession would have a heavy impact too.
One business also recounted several instances of non-British EU workers being made to feel unwelcome in the UK after the referendum vote, and expressed concern about the UK’s social cohesiveness and the future trajectory of ‘Britishness’.
This suggests that “the UK could see a brain-drain if entrepreneurs feel compelled to look elsewhere for a social structure that matches their expectations for tolerance and liberal values”, the report said.
The most positive element reported by the UK startups was the fact that the country has a new government in place, after Theresa May triumphed earlier than expected in the Tory leadership race.
“Clearly not all the founders [we] spoke to are politically affiliated with the Conservative Party but many expressed relief at a new Prime Minister who is perceived to be experienced and detail-oriented — a sense of partial relief doubtless encouraged by the fact she was a Remainer (if only a weak one),” TechCrunch reported.
It said that technocratic, stable political leadership might not be able to save the UK from the fast-accelerating economic ravages of Brexit but for UK entrepreneurs — who overwhelmingly voted to Remain — it beat the alternative: the Tories’ hardline Brexiteer wing.
One startup founder said his biggest fear at this point is that “the full, totally cut-the-cord, independent UK [politicians] start getting listened to”.