Techxit concerns Trumped – keep calm and code on

23 November 2016

The UK has almost 60,000 tech businesses which together employ over 1.5 million people, and the numbers continue to grow. Much of the growth in the tech industry has been fuelled by startups which have benefited from the UK’s ability to attract talent from across the EU and the rest of the world.  However, following the Brexit vote there were concerns that the UK’s days as a magnet for tech talent may be numbered in a so called Techxit. As we wait to see when/if Article 50 will be triggered and try to manage the uncertainty this brings, we also need to monitor the changes that a new USA administration will bring. Will Trump help or hinder the UK tech sector?

Most are agreed that the UK Government must ensure that any changes to the UK immigration rules following the UK’s departure from the EU recognise the need to attract and retain the highly skilled people the tech sector requires. In addition, the impact of the incoming Trump administration will be far-reaching on the business world and may also be of particular significance to the tech sector’s mobile workforce.

In a survey conducted (prior to the Brexit vote) for the Government’s ‘Tech Nation’ Report (the “Report”), UK technology companies identified access to talent as the most significant challenge to growth that they face. To address this challenge, startups have been forced to look abroad to meet their staffing needs. Free movement of people allows startups to recruit across the EU without any burdensome regulations. In the Report, 1 in 5 technology businesses highlighted other EU member states as being an important source of tech personnel.  

Techxit concerns may be eased by the announcement by Google that it intends to create 3,000 jobs building a new headquarters in the City of London and by Facebook hiring an extra 500 staff when it opens its new headquarters next year. Concerns may also be eased by the expected announcement in the Autumn Statement later today that an extra £2 billion will be allocated to investment in R&D by the end of this Parliament.

Here we consider some of the key questions facing tech startups, while continuing to hope that Sadiq Khan is right when he says that London is “the envy of Europe and open to talent, innovation and entrepreneurship from all four corners of the world”.

Why do startups rely on foreign talent?

Years of under development and a lack of investment in tech education from primary school up to university degree level has resulted in a shortage of UK graduates, and a demand for foreign tech talent. The tech sector thrives on diversity and relies on the best minds from different cultures, backgrounds, ages and education systems coming together to create sophisticated and innovative technology. It relies on a mixed workforce, ideally made up of UK workers, EU workers and the rest of the world.

What are the likely changes to immigration law?

There have been many “experts” discussing the likely changes that will occur post Brexit; a simple online visa waiver system (similar to the US ESTA) for EU nationals, a new “Australian” points based system, a “London visa” for the highly skilled, reverting back to the old Work Permit system that existed pre 2008, the list goes on. The truth is, nobody knows exactly what Brexit will bring, not even the “experts”. However, we can confidently say that in the next few years the most likely overall outcome will be that EU nationals will require some form of UK work permission.

How may these changes affect tech startups?

The extent to which free movement of people helps the UK remain one of the leading technology centres is debatable. Amongst other factors, our stable economy, business-friendly tax environment and easy access to capital certainly play a role. However, any additional hurdles for people entering or being allowed to remain in the UK will undoubtedly reduce the amount of UK-bound skilled workers and may lead to an outflow of EU workers already in the UK. This in turn would reduce the quality and the quantity of tech talent available for startup businesses and the number of entrepreneurs (whether from the UK or abroad) choosing to begin their ventures in the UK.

With other countries vying to replicate the tech success enjoyed by UK companies, a lack of access to talent could have a big impact on the UK startup scene. Anecdotal reports suggest many businesses are already considering relocating or setting up in other competing hubs. Officials from some cities, such as Berlin, have even started actively targeting UK-based entrepreneurs in an effort to entice them to move abroad. Whilst only part of the UK’s successful formula, an immigration policy that welcomes highly skilled individuals is a vital ingredient if we are to remain the technology centre of Europe. 

With uncertainty in the USA, will there be opportunities in the UK? Will the UK tech arena become a safe haven for disillusioned US tech entrepreneurs and fill the void that Brexit may create?

Trump’s focus does not seem to be on the tech sector. He has previously criticised Apple on how they dealt with the unlocking of an iPhone for a federal investigation and expressed his concern about the iPhone being manufactured in China. Silicon Valley will no doubt continue to be the world’s tech capital, but the focus of the Trump administration is likely to be on domestic matters, in particular infrastructure spending. Trump has also criticised the US visa regime for highly-skilled workers. If such statements become real policies, might this lead to a Trexit in the US? If so the UK tech sector should be alive to the opportunities this may create.

What should startup owners be doing?

Stay agile - Brexit is clearly not the ideal outcome for the UK’s tech sector. However entrepreneurs by their very nature are resilient and should look for opportunities. For example will the Government need tech support to deal with the bureaucracy Brexit will bring? Historically, we have seen that tech companies can adapt to hostile political and economic environments.  Microsoft started out in the early 1970’s US recession and Airbnb were founded during the 2008 financial crisis. 

We have prepared a guide to UK visas for US families considering relocating to the UK, which provides an overview of the main visa options open to them - please see Guide to UK immigration and visa options for US citizens wishing to live in the UK

Plan for sponsorship - Apply for a Sponsor Licence from the Home Office now, in order to assist non- EU and possibly EU workers to obtain a UK visa after Brexit.

Audit - Undertake a full audit of your current workforce to gather data on their nationality. You will need to monitor your EU workforce much more closely if work permission is required in the future.

Regularise your EU workers – An immigration audit will also highlight your current EU workers that could apply for permanent residence and possibly a British passport before Brexit occurs or via the transitional arrangements that may exist after we leave the EU.

Staff involvement - Reassure your staff that although not guaranteed there should be transitional arrangements in place to allow EU nationals living and working in the UK to obtain permanent residence in the UK due to having a legitimate expectation that a EU worker could settle in the UK after 5 years exercising their EU free movement rights.

Further information

Should you have any questions regarding the issues raised in this blog and/or any questions about setting up or investing in a business in the UK, please contact Roberta Draper or any member of our immigration or corporate & commercial teams.

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We welcome views and opinions about the issues raised in this blog. Should you require specific advice in relation to personal circumstances, please use the form on the contact page.

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