BREXIT, we’re out, so are high-growth businesses at risk?

How will Brexit impact startups and scaleups?

Almost 75% of high-growth businesses in the UK were hoping for a remain vote with tech startups overwhelmingly opposed to Brexit – but the vote didn’t quite turn out the way many expected it to, especially the politicians!

As we go through this period of uncertainty the real impact of Brexit on SME and Growth businesses is guesswork at this point. Here at 4 Oceans the real question we are asking is about startups and scaleups and whether they may lose access to finance and talent.

The European Investment Fund (EIF) contributes a significant pot of EU money into UK businesses, with more than £2.3bn in commitments as of December 2015.  The EIF provides SME finance across Europe through debt and equity funding, and it has also invested money into 144 UK based venture capital and private equity funds, such as Amadeus and Draper Esprit. Whilst the EIF has stated there will be no immediate change in the medium term it is unlikely that the EU will continue to fund UK businesses or VC funds post-Brexit.   We shouldn’t forget, of course, that the UK also contributes to the EIF so presumably that cash could be freed up for direct investment into UK Businesses and VC Funds.

EU cash might not be the only thing we’ll lose. Nearly 45% of startup employees come from EU countries, a sure sign of the shortage of tech talent in the UK.   Ending free movement may have a serious impact on access to these skilled people. Although it’s highly unlikely anyone will be forced to leave, new businesses could have trouble attracting employees. We hope talented people will always be welcome, but visa requirements may make the UK a less attractive destination for new comers.

So are there any positives? One silver lining could be waving goodbye to EU State Aid rules. These limit the amount of help a country can give businesses in an effort to maintain competition across the EU.  They directly affect VCTs and Innovate UK grants, among other schemes.  Brexit could see the UK able to provide more support to high-growth businesses in the future and leap ahead of other members.

These are just a few possible changes that might affect startups and scaleups.   Although we would predict uncertain and potentially difficult times ahead for growing businesses, it’s impossible to say what will happen going forward. We’ll be keeping a close eye on how the numbers stack up.

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