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Doom, Gloom and Unease: London's Tech Scene Reacts to Brexit

With the break from the EU, many in the tech sector were left questioning whether the city can fulfil its promise of becoming a global technology hub.
Old Street Roundabout in East London's Tech City cluster | Source: Wikimedia Commons
  • Bloomberg

(Bloomberg) -- At Second Home, a co-working space for startups in a trendy part of East London, young tech workers were discussing the ramifications of the Brexit vote as a gourmet ice cream truck served fresh scoops out front Friday. Young people voted overwhelmingly to remain part of the European Union, according to exit polls, and many of those working in London's burgeoning tech scene were horrified by Britain's decision to break away.

"People were shocked when they woke up this morning," said Sophie Hill, chief executive officer of Threads Styling, a fashion and e-commerce company. Hill, who grew up in Northern England, said she was dismayed that so many from her home town, particularly older people, voted to exit the EU. "I consider myself European," she said.

She has about 50 employees globally, many of them under 35, and plans to hire many more. "It makes us question whether we have 100 people here, or 50 here and another 50 in Paris," she said.

With the break from the EU, many in the tech sector were left questioning whether the city can fulfil its promise of becoming a global technology hub. They worry an exit from the E.U. will make it harder to hire people and raise money from investors.

"I'm devastated, I think this is a complete disaster," said Rich Pleeth, the founder of the friend-finding application Sup. "Capital raising just moved from tough to impossible. The older generation voted with their hearts and not their brains and they've taken us back 30 years."

Hayden Wood, a former energy consultant who co-founded Bulb, a London-based startup that sells renewable power, said the generational divide was a central reason the referendum succeeded. He was especially angry about what he said was misinformation tailored to play up to the fears of older people about immigration, jobs and healthcare. While many people in the tech scene were concerned about the long-term, Wood was trying to remain optimistic. "I don't feel like it's helpful to see it as a disastrous outcome," he said. "It's unclear what's going to happen."

The British government has spent considerable time and money to expand London's tech sector, hoping it will collectively grow to be a meaningful supplement to the city's powerful finance industry. Prime Minister David Cameron, who announced his resignation following the Brexit vote, has made expansion of the technology sector a central part of his economic policy.

The industry has benefited from relaxed immigration rules that allow coders and other workers to move to London from throughout the EU at little expense. According to Tech London Advocates, an industry group, roughly 20 percent of London's technology workers came from another EU country.

'Extremely Depressed'

A few streets away from Second Home in another London technology co-working space, The Brew Eagle House, Frans van Eersel, the founder of dopay, a London-based payment processing firm that works with Barclays, is concerned banks, retrenching as they cope with the stress of Britain's exit, will stop investing in fintech firms and backing accelerators.

"The startup community is extremely depressed," he said. "The U.K. has been a good platform for fintechs but now that platform may have to move somewhere else. That's the next fight. Amsterdam will start attracting them, or Barcelona or Paris or Berlin."

Another few streets away in East London, the mood at Campus, a co-working and tech community hub run by Alphabet, was subdued.

"Being in a state of limbo won't be that helpful," said John Hindley, who works remotely for an Israeli tech company, Personetics. Originally from Liverpool, Hindley sat across from his girlfriend Mor Shkedy, 25, from Romania. Hindley said he worried about Shkedy's ability to stay in the country long-term. "I'm just really disappointed not to have the freedom of movement in the EU that I took for granted," he said.

British Empire

Not everyone seemed concerned about the vote though. Nikola Tanchev and Todd Zillwood-Hunt, who both work for a fitness-oriented marketing service called Fitlondoners, sat editing video on their laptops. Neither had voted in the referendum and neither thought the result would impact them or their business much.

"I'm not worried about anything," Tanchev said. Originally from Bulgaria, he was convinced that he would still be able to work in the U.K. under whatever visa regime were implemented because he had the kinds of digital skills the U.K. needs. Zillwood-Hunt said he thought Fitlondoners would not be impacted negatively by fallout from the vote, unless London as whole came to be seen as a less desirable place to live.

Tanchev said he thought generational differences -- and a legacy of British exceptionalism that dates back to the British Empire -- contributed to the vote's outcome. "The idea that they were just another European country was a blow to their pride," he said. "They couldn't take that."

More established entrepreneurs in the fintech space say Brexit isn't all bad either. Rhydian Lewis, the founder and CEO of RateSetter, a London-based peer-to-peer lender, says banks will probably dial back loans as they reduce risk amid fallout from the vote. "Banks were just getting back their mojo and starting to lend again but if they retreat it's an investment opportunity for us," Lewis said.

Simon Calver, a co-founder of Lovefilm, which was acquired by Amazon in 2011 and who is now a principal in BGF Ventures, a U.K. venture capital firm, said he thought the Leave vote would not deal a devastating blow to the U.K. tech community as long as government could provide some reassurance quickly about the terms of the exit they would negotiate with Brussels.

"Even a policy statement that says, 'this is our intention,' would be helpful," Calver said.

He said it was particularly important for tech companies that they maintained easy access to the European market and a clear picture of the rules under which they will be allowed to hire foreign employees.

Laurence Krieger, the chief operating officer of a payments startup called Revolut, says British tech entrepreneurs shouldn't panic. They'll still be able to grow on the continent by opening subsidiaries and London should remain a financial hub, even if it is downsized. "It's a massive shame this has happened but it doesn't have to be the end of the world."

By Adam Satariano, Jeremy Kahn and Edward Robinson; editor: Nate Lanxon.

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