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.

Comments

Nobody knows yet

[Ed Avis]

While Brexit means London soon won't have access to the EU's open market across the continent,

Nobody knows yet whether this will turn out to be true. The negotiators may be able to cook up some deal that keeps the UK within the single market but outside the European Union (broadly as happens for Norway). On the other hand, a complete break is also a possibility.

Re:Nobody knows yet

[Oswald McWeany]

EU is going to want to punish UK severely as a warning to others to not leave. There will be no easy access to the single market.

Re:Nobody knows yet

[Anonymous Brave Guy]

More than that, it will still be possible to sell almost anything to European customers anyway. The worst plausible outcome for trade with the EU is probably that we fall back on general WTO agreements for a while, in which case we're mostly talking about tariffs here. Those are going to be relatively small by the standards of startup culture where you're looking for unicorn-level successes anyway, though they could conceivably be more of an issue for regular businesses in tech sectors if the EU decides to be obstructionist in any future trade deal.

There may be some regulatory hurdles, but in fields like IP and data protection our laws are obviously already aligned with the rest of the EU, so there's unlikely to suddenly be some big compliance burden unless the government shoots itself in the foot by trying to soften protections to appeal more to the US tech sector. YMMV if you work in a field like biotech.

The bright side for UK tech businesses, particularly smaller ones and startups, is getting rid of a lot of silly EU regulations passed in recent years, the things that say you have to put cookie warnings on your site, or if someone buys a digital download from you then by default you mustn't actually supply it for 14 days in case they change their mind, or that you have to apply different VAT rates and rules for customers in every different member state you sell to (which can change at literally a few days' notice, which no-one will actively give you) and file special returns accordingly. These poorly implemented regulations cause significant overheads for small businesses who want to be spending their time building useful things instead, often for no real benefit to anyone or even actively annoying customers, and the sooner we're rid of them the better.

There will certainly be downsides, probably including significant economic harm in the short to medium term, from Brexit. If we're going to do it, let's at least try to take advantage of the upsides as well.

Re: Nobody knows yet

[Rei]

The UK makes up about 1/6th of the EU's trade. The EU makes up about 50% of the UK's trade. One side has leverage in these negotiations, and it's not the UK.

The EU has made one thing and one thing alone abundantly clear: there will not, under any circumstances, be access to the single market without corresponding free movement of people. And no, Norway doesn't have that (neither do we here in Iceland). It's one of the founding principles of the EU, and it will not be compromised on.

The UK can of course leave the EU and choose to allow free movement of people in exchange for access to the single market. Whether that's acceptable to UK voters is a whole different story. And playing by the regulations of the single market also kind of defeats the point of the whole brexit thing. Countries like Iceland and Norway still have to obey the vast majority of EU regulations - we just don't get a say in making them.

Re:Nobody knows yet

[Zocalo]

The UK isn't in Schengen, so that's moot - there's a difference between not requiring ID to cross borders (Schengen) and needed to go through EU immigation controls at the border (non-Schengen) too. Now that the EU has us over a barrel however I'm sure some of them - like the Visegrad Group, or V4, (Czech Republic, Hungary, Poland and Slovakia) - might just try and insist that we adopt Schengen if we wish to have continued access to the EEA free trade area.

On the subject of the V4, their position does perhaps make how things are going to end up a little clearer to predict - provided that they are not just bluffing. Basically, they have promised to veto any Article 50 agreement that doesn't continue to allow free travel (with ID) for their citizens to the UK, as is currently the case. Any Article 50 agreement requires a unanamous vote in favour - all 27 remaining countries - so the only agreement V4 wil accept is a *very* soft exit, which simply won't be acceptable to Leave supporters. Likewise any extension of the two year period requires all 27 nations to agree which is equally unlikely so, two years after the UK invokes Article 50 whenever that is, it defaults to a hard exit with no trade agreements in place - the UK ceases to be member of the EU and becomes just another country with no established trade agreements in place.

That will no doubt make many in the Leave camp very happy... until the implications of having all the EU's trade treaties become null and void and WTO defaults kicking in strike home because they really, really, suck - why else would governments spend so much time negotiating treaties with each other? If we're lucky, we'll have that covered by getting an agreement to maintain the existing EU trade agreements as an interim measure as a stop gap, but if we end up in WTO defaults with one or more of our major trading partners, we're basically screwed - something even Pro-Leave groups concur with.

Re:Nobody knows yet

[AmiMoJo]

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.

EU lawsuits against tech companies

[OrangeTide]

If tax evading tech companies are sick of being dragged through European courts and fined hundreds of millions of euros, perhaps they should welcome Brexit with open arms. Imagine, a small island nation that will be easily influenced by promises from corporations to win votes for the politically ambitious. Everything is up for negotiation in the UK.

Brexit means that the UK can be the new America for these tech companies.

"remains Europe's hub for the technology sector"

[hey!]

Which is kind of contingent upon being part of Europe, economically and administratively speaking.

Life is about tradeoffs, and of course nobody can decide for other people whether the tradeoff is worth it. So if Britons want Brexit, fine. But rejecting one tradeoff means accepting another one; in return for being freed from all the annoying EU stuff, they'll have to pay a price. Insofar as they don't pay that price, then the substance of all that annoying stuff is likely not to go away. So suppose you're a US company interested in the Continental market, not just the UK. The best you could hope for would be the reestablishment of a more complicated version of the status quo.

The uncertainty is such that only a fool would bank on London maintaining its role in the EU. That might happen, or it might not. But either way if you're an American company, well, educated Germans usually speak very good English, often better than the average American does. The central location is also a little more convenient for operations, so locating in Munich is like putting your US HQ in Chicago.