A year ago, I wrote “Tech-xit – Reshaping Europe?”, exploring what Brexit would mean for the technology scene from a UK perspective. My conclusion at the time was that uncertainty would likely be damaging for the UK technology scene during the transitional years; so far that has not proved to be the case – to the contrary Brexit appears to have provided a fillip to the UK technology sector. (Please note this article was first published in September 2017).
Whilst we are a year on from my previous article, it is marked how little we have learnt about what the future political settlement will look like for the UK and the EU, and how little clarity our politicians have provided about their medium-term intentions for the economy, which means the UK technology sector continues to face an ongoing period of uncertainty.
Yet, what has been surprising is that the UK technology sector, rather than progressing conservatively, seems to have gone from strength to strength. If we were to look at market barometers the UK tech scene has remained beyond buoyant, in fact VC funding rounds have seen periods of record investment (all statistics from Dealroom).
The UK has seen a disproportionate growth in funding rounds versus its Continental European competitors during the course of 2017. Whether this is a long-term trend is hard to say, but the figures are striking – see Germany and France respectively (left and right below) – two leading European competitors by marked contrast. Where in the first three quarters of 2017 France has achieved just 65% of its 2016 funding total and Germany 114.5% (of a disappointing 2016 total of €2B), the UK has already achieved 142% of the €3.6B raised by VC-backed technology businesses in 2016.
The bounce in the UK technology scene and specifically the scale of funding may be a reflection of a range of factors, including:
· Some very large funding rounds, notably $540m in Improbable amongst others;
· Poor investment returns in other assets classes;
· The decline in the strength of the pound, which has attracted foreign investment, offered improved value for money for international investors and lower company costs than a year ago; &
· An excess of capital in the venture capital community
Nevertheless, these positive figures certainly go against my expectation of a slowdown in the UK tech scene reflecting the uncertainty relating to Brexit.
What has this meant for executives?
Kobolt Growth Advisors focuses on placing executives across the European market and anecdotally, we can say that:
· Continental Europeans are less open to relocating from the Continent to the UK;
· Equally Continental European executives are more open to relocation from the UK to Continental Europe; &
· Interestingly we have also found that more Europeans are open to relocation to Europe from the US, reflecting the political changes that are ongoing in that market.
Nevertheless, a lot of senior technology executives are still relocating to the UK from across the globe despite concerns about Brexit, and this is a direct reflection of the quality and quantity of opportunities that are on offer in the UK. In Europe, the UK still has the largest number of technology businesses of scale, with substantial financial backing, the right supporting eco-system and ready access to global markets.
Why has London succeeded during 2017?
It is this latter point that appears to be key - when we spend time in other tech-hubs across Europe (Stockholm, Berlin or Barcelona) they all recognise that Brexit offers a potential opportunity for them, but equally they still look at the UK, and London specifically, with envious glances as the example to follow. The depth of the eco-system, surrounding financial and professional services, the (relatively) easy access to the North American market and demonstrated success stories in the technology sector continue to mark London out as the leading European technology hub.
Whether all these advantages remain once Britain has exited the EU remains to be seen, but for the time being London continues to forge ahead of its European competition.