A fifth of UK startups expect to open a European outpost due to Brexit

Nearly a quarter of UK startups expect to open a European outpost due to Brexit, according to research from Silicon Valley Bank.

Silicon Valley Bank (SVB) releases its Startup Outlook report today. The report, now in its fifth year in the UK, is based on an annual survey of technology and healthcare startups that gauges their perceptions on European business conditions and Brexit, as well as fundraising, hiring and policy issues.

This year’s survey included responses from more than 940 startup executives across the UK, US and China.

‘The Brexit findings in our survey this year are compelling and we are pleased to bring some data to a conversation that has been largely anecdotal,’ says Phil Cox, head of EMEA and president of Silicon Valley Bank’s UK branch.

‘While 21 per cent of innovators say they will be opening European outposts, the majority will continue to back Britain as the home for their headquarters. Businesses are seeing more opportunity than fear, which can only be a good thing. Though startups are feeling less optimistic about 2017 than they were about 2016, even more are looking to grow their workforce this year. Not without challenges, but the British technology industry is not slowing down.’

Cox continues, ‘The UK is an excellent place to start a business. The elements that led to the growth of the UK’s innovation ecosystem include strong universities, a small-business based economy, a clear legal system, successful role models and availability of funding irrespective of business size.

‘Brexit may give us opportunities to address concerns about overall competitiveness within the EU by focusing on the factors that drive business innovation and success. The focus will be on simplification, easing contractual arrangements, encouraging investment and competitive taxation.’

Here’s what UK-based startups are saying about their sentiment in 2017.

Business conditions

Half (48 per cent) of UK startups expect 2017 to be better than 2016, down 10 per cent on last year and 16 per cent say this year will be tougher; 36 per cent say business conditions will be the same as last year.

Despite that, 89 per cent of UK startups are expected to grow their workforce in 2017, compared to 79 per cent in the US.

Brexit

Two thirds (62 per cent) of startups are not planning to open a European outpost as a result of the Brexit vote, while 21 per cent of UK startups say they are remaining in the UK but are opening a European outpost.

One in ten (11 per cent) are thinking of moving their HQ to Europe, 5 per cent are thinking of moving their HQ elsewhere (outside of the UK and Europe). One per cent are definitely moving their HQ to mainland Europe.

The top five issues facing startups in light of Brexit

Non-British employees are worried about their long-term opportunities in the UK (32 per cent), attracting VC funding is harder (21 per cent), increasing cost of running a business (21 per cent), harder to attract European talent (12per cent) and selling into Europe is harder (7per cent).

Fundraising

Eight in ten (81 per cent) says the fundraising environment is somewhat or extremely challenging and 56 per cent of startups expect their next source of funding will come from venture capitalists, up 16 per cent on 2016.

half (55 per cent) says their realistic long-term goal is to be acquired; 16 per cent say their goal is an IPO and 85 per cent of startups expect to see at least the same number of acquisitions in 2017 as last year.

Talent

Three quarters (76 per cent) say access to talent is their most important public policy issue (up from 61 per cent last year), while 96 per cent say it is challenging to find people with the right skills to grow their business.

A third (36 per cent) say the lack of access to talent has inhibited product development and 32 per cent say scaling their operations is tougher as a result.

Further reading on European Union

 

Owen Gough, SmallBusiness UK

Owen Gough

Owen was a reporter for Bonhill Group plc writing across the Smallbusiness.co.uk and Growthbusiness.co.uk titles before moving on to be a Digital Technology reporter for the Express.co.uk.

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