For those of you who may not be aware, the UK will hold a referendum on 23 June to decide whether or not UK should remain in the European Union. As a (fintech) startup, we are really worried about the current situation, and tracking the debate very closely here. Here are some points to consider and ponder upon.
Uncertainty is bad for any business, particularly for startups
We are going to see a lot of volatility in public markets over the next few months with all the surfacing opinion polls, views from politicians and influencers, etc., and this will affect how investors, clients and consumers make decisions. In the startup world, some companies have money to survive only for a few months, and uncertainties from such events could be fatal in some cases.
The Pound depreciation might adversely affect several tech businesses
Most technology expenses are denominated in USD, and with the pound depreciating significantly, the monthly burn rate for most tech startups has increased significantly. At CityFALCON, for every 5% decline in GBP, we have to unfortunately reduce one offshore headcount.
Chart credit: Google Finance
Non-UK investors might think twice before investing in UK companies
If you’re a non-UK investor looking to invest in the UK, you might actually wait until there is enough clarity on how all this will affect the economy, currency and businesses.
Your consumer market just shrunk from 500m to 60m
Most Silicon Valley experts will tell you that one of the biggest advantage that a US startup has is the large consumer market within the country. Some may argue that we will still have access to Europe even if we aren’t part of the EU, but it’s not going to be easy, and this leads nicely into the next point.
More paperwork and regulation
There isn’t enough clarity on what will happen to VAT, banking and other regulations for UK companies to operate in the EU. Most likely, we’ll have to increase our admin tasks and comply with different regulations.
Highly skilled talent from non-EU countries might replace less skilled labour from the EU
The UK have shut the borders to non-EU talent to keep the net immigration (EU + non-EU) figures within control. The UK will now have an opportunity to allow only skilled labour from across the World to enter the UK, and this may improve the availability of skilled talent. Hopefully, this will help control the spiralling tech salaries in the UK.
Fintech ecosystem might take a big hit as London may no longer be the fintech capital of Europe
For the last few years, several financial institutions have evaluated whether London is the best place for them to be in Europe. They’ll now have one more reason to move their business elsewhere.
UK will lose a lot of credibility in the eyes of the world
No doubt, we have to do the right thing for us as a nation, but we should keep a few things in mind. The UK has flourished during boom times by being a part of the EU, and is now looking to jump ships in bad times. Also, imagine how you will feel as a highly skilled immigrant from the EU being constantly reminded that you are a liability in the UK by having recourse to public funds.
The Pound has touched 1.39 while I’m typing this, and I can see several tough months ahead of us if this trend continues. We have added Brexit onto our platform on CityFALCON, and you can access a personalised real-time newsfeed here.
And yes, I’ll be voting for UK to stay within the EU.