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Research Suggests ‘Brexit’ Has Had Little Impact on U.K. Companies

Even as Britain prepares to leave the E.U., investment in startups peaked last year. Here’s why.

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BY Zoe Henry - 10 Jan 2018

Research Suggests 'Brexit' Has Had Little Impact on U.K. Companies

PHOTO CREDIT: Getty Images

When Britain voted in 2016 to exit the European Union--a move known colloquially as "Brexit"--many entrepreneurs feared the impact to their bottom lines.

Companies such as Lovehoney, a Bath, England-based retailer of adult toys, suggested the move could limit immigration, thereby impinging on their ability to hire foreign talent. Others insisted that the need to re-negotiate trade deals to replace the E.U.'s free trade zone would deter investment in the British startup ecosystem.

Research suggests this hasn't been the case.

2017 was a record year for startup investment, with U.K. companies raising $7.7 billion--more than double the 2016 figure, according to Dealroom data. Jeremy Sosabowski, the co-founder of London-based risk-forecasting firm AlgoDynamix, went so far as to call the technology scene "almost worryingly robust," in an interview this week with Quartz.

Financial technology companies fared particularly well, pulling in the largest share of capital last year ($2.9 billion.) Indeed, the global remittance network TransferWise alone-one of Europe's better known "unicorn" firms- raised 211 million ($286 million) in a November round, valuing the company at $1.6 billion. The London-based alternative lending firm Funding Circle, meanwhile, raised 81.9 million ($100 million) in January 2017.

The U.K. also remains the top destination for technical talent--though it has lost some share to neighbors Germany and France, according to a recent report from the London-based venture capital firm Atomico. Tom Wehmeier, the firm's head of research, suggests that this loss has something to do with Brexit; European nationals may no longer want to live in Britain, given the uncertainty of their work visa status. Others say it's paramount that the British government does everything it can to ensure that foreign talent will still be available to tech startups.

Even as investment surges, British optimism in the startup scenes still pales in comparison to that of other European nations, according to the Atomico report. France, for instance, which recently introduced its own technology visa program, continues to revel in the election of moderate Emmanuel Macron, who has personally vowed to make France a "startup nation." Germany, meanwhile, recently celebrated the re-election of chancellor Angela Merkel, whose "steady hand" is valued by many local startups. "Everybody seems happy with her, and the way she is leading the company without drama," said Gero Decker, the founder of the Berlin-based IT services firm Signavio, in a previous interview with Inc.

Time will tell if venture capitalists continue to invest in the U.K. startup ecosystem, as Theresa May's popularity steadily deteriorates--and the nation moves closer to independence from the E.U.

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