In Brexit, London startups see risk — and opportunities

LONDON — Within 24 hours of Britain’s vote to leave the European Union, London-based technology startup Netz had five investors suspend hundreds of thousands of pounds in promised money.

Now the company, which provides data to financial companies on potential customers, can’t hire the candidates it had lined up. And should it eventually get the needed investment, it will face the risk of not being able to tap enough talent as Britain’s departure from could make it more difficult to hire from the EU’s other 27 countries.

“The people we want to hire, are they still interested in coming to London? There is a lot of uncertainty from a regulatory point of view,” said Netz CEO Frank Bertele, a German national. Since the vote, he has accelerated plans to expand into the United States.

Britain’s decision to break away from the EU has created uncertainties for businesses, and there is no more vulnerable a period for a company than its infancy. London’s tech startups will scramble to cope — but many are looking to the tumult also as a source of opportunity for new business and to gain ground on the less nimble established companies.

Among the top concerns for startups in London is hiring. Being part of the EU guarantees free movement of workers, without the hassle and costs of visas or work permits. A 2015 survey by Wayra, a startup incubator, found that one third of employees in tech startups in Britain are from outside the country, and one in five comes from another EU nation.

The concerns about the potential effect of a British EU exit, or Brexit, come as the U.K. tech industry is already experiencing a talent shortage. To help with that, the government allows firms to speed up recruitment of nationals from outside EU. Job search engine Adzuna shows there are around 35,000 open software positions in London.

DueDil, a financial technology startup, has doubled its staff every year for the past five years, with 20 percent coming from other EU countries. It is growing far too quickly to have the luxury of waiting for Britain’s relationship with the EU to be clarified over coming months. As a result, it has hastily drafted a plan for a European office. It will decide in the next few weeks whether that will be in Dublin, Berlin or another European city.

“If it hadn’t been for Brexit, we would probably have hired more people in London,” said Damian Kimmelman, CEO of DueDil.

According to Pat Saini, the head of the immigration team at law firm Pennington Manches, it costs upward of 5,000 pounds ($6,650) in visa costs and related fees to hire a person from the U.S. or another country outside the EU. “If EU nationals, with Brexit, end in the same category as nationals from outside the EU, then companies relying on EU labor will have to wait longer and pay extra for workers,” she said.

For some startups, however, the uncertainty has not been all bad.
DueDil landed three contracts in two days from investment-keen American equity firms that wanted to profit from the drop in the British pound and access DueDil’s database of detailed information about private firms in the U.K.
And by nature of being small, startups have a flexibility to adapt to new situations.

“When people start realizing that these obstacles in front of them are opportunities,” Kimmelman said, “startups are the ones that best can exploit them.”

Published: http://www.statesman.com/news/business/in-brexit-london-startups-see-risk-and-opportuniti/nrrmM/

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