Unicorns are running free in the UK but Brexit poses a tough challenge

Once a rarity, unicorns are being spotted in increasing abundance in Britain and Europe. But looking ahead, Britain's visa system may mean that these valuable beasts will face a long-hard winter.

When the Government's Digital Economy Council convened at the end of October, there was some good news to digest. According to data compiled by analytics company, Dealroom.co, the United Kingdom has been home to no less than 60 $1bn tech companies since the late 1990s, representing 35% of the 168-total created across the whole of Europe and Israel. Equally important, these once rare-as-hens-teeth ‘unicorn' businesses are not confined to London and the tech powerhouses of Oxford and Cambridge. While the capital undoubtedly dominates, unicorns have also been sighted as far afield as Manchester - which has five to its name - Edinburgh and Leeds. 

All of which must have been very satisfying for the assembled policymakers and digerati at October's Digital Economy Council Meeting. Everyone knows the strength of the UK's tech startup scene, but if young companies are to fulfill their potential and make a genuine impact on the wider economy, then it is essential that a significant number of innovative businesses succeed in scaling up nationally and internationally. And while the UK has yet to create ‘the next' Google, Facebook or Microsoft, an increasing number of $1bn businesses spread across the country as a whole is a promising sign that the tech sector is moving in the right direction at a time when the uncertainties surrounding Brexit seem to be mounting rather than diminishing. 

 

The sting in the tail

That's the glass-half-full perspective. But looked at through the lens of a glass-half-empty, the imminent decoupling of Britain from the rest of Europe threatens to undo at least some of the progress made by the tech industry. 

That's something that Gerard Grech, CEO of Tech Nation acknowledges. As one of the bodies responsible for nurturing the UK's digital industry, Tech Nation co-commissioned the Dealroom data and was quick to publicize and celebrate the results. But Grech accepts there are some real challenges ahead - not least around the hiring of talent in the post-Brexit era. "This is a young industry that is growing fast," says Grech. "We need to be aware of the demand for skilled people and the demand for leaders."  

As he sees it, the success of the tech sector depends not only on the availability of coders and engineers, but also the next generation of skilled CEOs, coaches and mentors who can help startup companies scale up to unicorn status and beyond. And that availability depends - at least to some extent - on the shape of immigration policy after Brexit. "We need to ensure there is access to talent," he adds. 

Antoine Baschiera, CEO of Early Metrics, puts it more strongly. His company works for Venture Capital Funds, Banks and Corporates and rates the potential of startup companies, with its assessments based on a range of non-financial factors.  "For me the biggest Brexit risk for the UK tech startups is lack of access to talent," he says. "The other risks - around regulation and investment - don't even come close." 

Baschiera sees it as a relatively simple equation. The UK has a tech sector that is "disproportionate" to the pool of indigenous talent available," he says. "The tech industry is growing faster than your local talent pool can support."

So to thrive, the unicorns of tomorrow must recruit from elsewhere. At the moment, it's not clear to many in the industry where that elsewhere actually is.  

 

The scale of the problem

So how big is the potential problem? Well that depends on what kind of talent you're talking about. At the upper end of the corporate structure, senior decision makers and strategists from all over the world are accustomed to moving from jurisdiction to jurisdiction in search of well-paid jobs. 

John Claude Hesketh - a managing partner at global recruitment company Marlin Hawk - doesn't believe there will be any issue with recruiting people for the top positions, not least because London is still an attractive city for the global management elite. And regardless of immigration policy, he notes that senior talent is rarely, if ever, refused visas. "If you have a talented leader from, say, Uzbekistan who has the ability to really move a company forward, that person will get a visa," he says.

 

Down in the coalface

But what about down at the coalface - startup founders and coders? Signals from government, thus far, suggest that citizens of the EU will be treated equally with people from elsewhere in the world when it comes to allocating visas and permissions to work. In other words, no vestige of freedom of movement, unless part of a very big trade deal.

So for an EU citizen who might currently be choosing between Berlin, Barcelona, Paris or London, any requirement to negotiate a time-consuming bureaucracy in the post-Brexit era could divert talented people away from the UK and towards other EU countries.

Tech Nation is doing its best to make things easier. As Grech explains, the organization currently offers around 1,200 founders visas and this can go as high as 2,000. The potential problem is that applying is time-consuming and expensive. Assuming a candidate is eligible, there is a two-stage process to go through, which includes direct approval from the Home Office and a personal investment of about £600 (£456 for stage 1 and £152 for stage 2). 

Baschiera says there is also a cultural deterrent. "The upcoming generation of talent within Europe is not accustomed to having to deal with a visa system," he says. So Berlin and Paris will look at lot more attractive.  

 

Operational matters

The movement of people issue does not apply solely to recruitment. Any barriers that go up in the wake of Brexit may also affect the way that IT companies operate day-to-day and how they deploy their staff internationally. 

Levon Antonian is founder of Halian, an IT services company with operations in the UK, Europe and the Middle East. In addition to offering managed services, Halian provides people and expertise to support projects within client businesses. From a personal and company perspective, Antonian is not optimistic about impact of Brexit on the IT sector and believes that an end to freedom of movement into the UK will have a damaging impact on the industry.

More specifically, he also expects his own company's operational strategies to change in response to any tightening of UK immigration laws. "In our industry, if a client needs a problem solved, they want a resource on site within two or four weeks," he says. 

In that respect, there is pressing need to be able to move people around. "At the moment, we move people from the UK to Europe to support our operations in Europe," he says. "And we move people from Europe to the UK," he adds. In future Halian's thinks his ability to move people around could be constrained.  

For his business, it's not necessarily a life-threatening problem, given that 90% of revenues come from Europe and the Middle East. Within Europe, he will still have a whole continent of talent to choose from. Meanwhile, in the Middle East, talent can be brought in from regions such as India. Nevertheless, he sees Britain facing a degree of isolation from Europe's tech labor market.  

 

The global market

There is, however, another side to the coin. If it is harder - or less attractive - for EU citizens to come to the UK, then it may well be that talented people from elsewhere in the world - the Indian subcontinent, Africa, US, Australia, etc. - will step in to fill the gaps.

According to Jeff Heenan-Jalil, CEO of Europe at enterprise AI company, IPsoft, British-based companies would prefer to draw from a UK talent pool in the absence of EU workers, but there is increasing interest in looking further afield. 

"Following the tightening of visa requirements over the last few years, there has been an uptick in local hiring," he says. "Most companies tend to set up offices where the resource pool is rich and when a skillset isn't available in that catchment area, they look to the global marketplace to fill that gap. This is becoming more common as our demand for digital skills vastly outstrips the talent that may be available locally," he says.

But for a startup, even one on the road to unicorn status - searching the world for talent isn't necessarily going to be easy - indeed one of the attractions of EU citizens is that they can move to cities such as London, check out the local opportunities and proactively approach those who are hiring. That's more difficult for someone living in India or Brazil. 

 

Tight visa rules

Simon Hember of cyber security recruitment consultancy, Acumin Consulting worries that the visa system will not be fit for purpose. By leaving the EU and enforcing even stricter visa requirements the UK has minimized its talent pool. One of the major issues is free movement of skilled workers. With the suggestion that EU workers who are paid less than £50k a year will be defined as ‘unskilled' the UK is shooting itself in the foot, he says, adding. "There are many highly skilled cybersecurity workers paid less than £50k."

The unicorns listed by Dealroom's report for Tech Nation highlights the range of skills that will be required. In Manchester's fast-growth business cluster there is particular strength in e-commerce and media. In Cambridge, cyber security company Darktrace is one of the most rapidly emerging companies. Oxford's Nanopore has streamlined DNA sequencing. 

And in the coming years, Britain's nascent unicorns will need people skilled in AI, blockchain, robotics, fintech, cybersecurity and, indeed, a broad range of key technologies, and as things stand it seems likely that a departure from Europe without any deal on the movement of people will cause some very real problems that may require a global approach to recruiting. Antoine Baschiera hopes that at the very least, Britain will sign bilateral deals with European countries to free the flow of talent. Ultimately, part of the answer is nurturing skills at home. "But that," as he says, "is a long-term solution".