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London To Tech Startups: Please Don't Mind the Brexit Gap (cnet.com)
An anonymous reader writes: The UK faces a potential economic backlash from its decision to exit the European Union, but London Mayor Sadiq Khan doesn't think tech startups should be worried. Khan on Monday stopped in New York while on a goodwill tour that included visits to Montreal and Chicago. His mission: to win back the hearts of tech companies that may be turned off by Brexit. The breakup looks bleak for tech, with nearly nine out of 10 British tech leaders opposing Brexit before the June vote. And while the effects of Brexit haven't taken hold yet, Khan remains optimistic about London. The British metropolis remains Europe's hub for the technology sector, Khan said, citing a poll commissioned by London & Partners, the mayor's economic promotional company. "London's been open to people, to trade and to ideas for more than a thousand years, and that's not going to change," Khan said Monday at the Chelsea office of workspace company WeWork. The survey reached out to more than 200 US tech executives, who believe London is the best city in which to build a startup in Europe, beating out Berlin, Paris and Dublin. While Brexit means London soon won't have access to the EU's open market across the continent, US tech leaders still choose the city for its "favorable time zones and lack of language barriers," according to a statement from the mayor's office.
On passporting, I have to say it is surprising that the words spoken by obviously self-interested financial services companies are being taken at face value by many people. After all, this is an industry who many seem to argue can never be trusted to speak in any manner other than one motivated entirely by their own short-term self-interest.
The reality is that passporting is a sideshow and is about overhead costs for banks, not whether they can operate in any one country. They know that they need to continue to employ staff running "high value add" activities in London for a huge number of reasons, primarily to do with the network effect of having so many banking, asset management, legal, accounting, tax and other professionals in the same place. The UK government will continue to make it relatively easy (if perhaps expensive) to get visas for people in those jobs as they already do for non-EU citizens. But some "low value add" activities like clearing may now need to be either duplicated in two countries or relocated from the UK to somewhere else without passporting rights. That will increase overheads and entail significant one-off transition costs which they would obviously rather not pay. Note that these are not necessarily people costs as banks will likely take the opportunity to automate and locate in low-cost jurisdictions.
This is a bigger problem in turn because the European "high finance" banking market has basically been overcrowded for at least 20 years now - my suspicion is that a significant number of banks are at best breaking even but still desparate to be involved in "high finance" because it makes them seem more exciting and "cleverer". So the ability to pass those higher overheads on to customers is likely to be limited (at best) given this.
Politically it is only really the French pushing hard on this. They are still upset that after the Euro was established in the late 90s a huge amount of trading activity moved from Paris to London as banks consolidated to reduce costs during the early 2000s slowdown. I suspect that as the French realise that actually Eastern Europe will be the beneficiaries of what they are asking for their rhetoric will recede on this somewhat and pragmatism driven by Germany, Italy and Spain (whose banks are in a pretty perilous state already) will prevail and equivalency granted (given that equivalency is already granted for the Cayman Islands and the US, it is hard to argue that the UK, whose regulation will start in an identical position to the remainder EU, should not be given the same status).
However, passporting was not the main reason that banks lined up to support "Remain". What they were really worried about was the EU going down a different regulatory path on financial services which had the potential to cause significant damage to them. The UK had effectively been slowing this down behind the scenes but now that is gone. This is not about a competitive dynamic between the UK and the EU but the EU regulating out of existence (or out of profitability) a significant chunk of their business within the remainder EU. The remainder EU countries would probably be bigger losers economically than the UK on this, although the EU would argue this is with the benefit of a reduction in systemic risks. But from the banks' perspective that doesn't matter - it would simply be an overall smaller market for them.
Yes, we read the same post.
The EU is not going to endanger nearly 20 percent of their economy to make a point. It would be far more dangerous to damage the EU economy than the optics of a successful Brexit.
There is not any leverage on either side. Both must get along and negotiate a mutually beneficial deal, or slit their own throats with a childish tantrum.
Yes, I agree they will cut a deal. This will probably happen after months of threats and bluster from both sides. It definitely won't be a pure "screw the Brits" deal. It will contain a few concessions, probably minor restrictions on free movement, which May can point to as victories. These will be the exception rather than the rule. By and large the post-Brexit economic reality will probably resemble the pre-Brexit reality, except that Britain will exercise less influence in EU affairs. The market access will come at a price. The notion being touted that the UK is sufficiently important by itself to set the terms of the deal it wants is simply wrong.
The UK makes up about 1/6th of the EU's trade.
Yes, but only to a few EU countries. The rest do minimal trade with the UK and are far more concerned with freedom of movement. Absent that, the UK isn't getting a deal.
The company I work for exports a lot of stuff to the EU and the rest of the world. Exporting to the EU is much, much easier because the rules are harmonized, and so there is a lot less paperwork and dealing with import tariffs and an office in one country and server other EU member states near it easily enough. Outside the EU things get tricky, especially when trying to move hazardous materials like lithium batteries.
After Brexit our laws are likely to diverge from the EU. After all, what is the point of "taking back control" if they don't? I imagine data protection will be weakened fairly quickly, to allow for greater domestic spying and access to browsing history and email by local government and random agencies like Trading Standards. If you read the submissions made regarding the Snooper's Charter, you can see that they are chomping at the bit to violate your privacy. Human rights and employment law will be gutted too, to make us more "competitive". The race to the bottom is just getting started.
More over, we are going to have to adopt US and Chinese standards to get the trade deals we need. Being only a small player we can't dictate terms any more, we will just have to adopt their rules in much the same way as we have to adopt the EU ones.
const int one = 65536; (Silvermoon, Texture.cs)
SJW, n: "Someone I don't like, and by the way I'm a fuckwit" - AC