How UK VCs are managing the risk of a ‘no deal’ Brexit

Grab your economic zombie mask: A Halloween “no deal” Brexit is careening into view. New prime minister Boris Johnson has pledged that the country will leave the European Union on October 31 with or without a deal — “do or die” as he put it. A year earlier as the foreign secretary, he used an even more colorful phrase to skewer diplomatic concern about the impact of a hard Brexit on business — reportedly condensing his position to a pithy expletive: “Fuck business.”

It was only a few years ago during the summer of 2016, following the shock result of the UK’s in/out EU referendum, the government’s aspiration was to leave in a “smooth and orderly” manner as the prelude to a “close and special” future trading partnership, as then PM Theresa May put it. A withdrawal deal was negotiated but repeatedly rejected by parliament. The PM herself was next to be despatched.

Now, here we are. The U.K. has arrived at a political impasse in which the nation is coasting toward a Brexit cliff edge. We’re at the brink here, with domestic politics turned upside down, because “no deal” is the only leverage left for “do or die” brexiteers that parliament can’t easily block.

Ironic because there’s no majority in parliament for “no deal.” But the end of the Article 50 extension period represents a legal default — a hard deadline that means the U.K. will soon fall out of the EU unless additional action is taken. Of course time itself can’t be made to grind to a halt. So “no deal” is the easy option for a government that’s made doing anything else to sort Brexit really really hard.

After three full years of Brexit uncertainty, the upshot for U.K. business is there’s no end in sight to even the known unknowns. And now a clutch of unknown unknowns seems set to pounce come Halloween when the country steps into the chaos of leaving with nada, as the current government says it must.

So how is the U.K. tech industry managing the risk of a chaotic exit from the European Union? The prevailing view among investors about founders is that Brexit means uncertain business as usual. “Resilience is the mother of entrepreneurship!” was the almost glib response of one VC asked how founders are coping.

“This is no worse than the existential dread that most founders feel every day about something or other,” said another, dubbing Brexit “just an enormous distraction.” And while he said the vast majority of founders in the firm’s portfolio would rather the whole thing was cancelled — “most realize it’s not going to be so they just want to get on.”

After three years of Brexit, this is uncertainty that’s certainly understandable. And of all industries that Johnson’s “no deal” could put the screw to, tech has the least to worry about if we’re to believe the prevailing view among the VCs we spoke to. So — silver lining — other types of businesses have it far worse.

Investors argue that startups are relatively insulated against Brexit risk, certainly versus businesses that are dependent on moving physical goods across borders. Although there is also consensus that a ‘no deal’ will increase bureaucratic and administrative burdens on startups in a way that none of them welcomes.

VCs also told us they have been advising their startups to take various administrative and logistical steps to try to prepare for Brexit — such as telling them to obtain an Economic Operators Registration and Identification (EORI) number so they can export to Europe post-Brexit.

The U.K. government has also just announced it’s auto-assigning UK EORI numbers for small businesses. However, that’s merely a first step; as the European Commission immediately pointed out, U.K. businesses that wish to trade in the EU post-Brexit must also obtain an EU EORI number from the EU member state into which they first import or export goods. So there’s plenty more bureaucracy where that came from.

Clearly a “no deal” scenario complicates the preparation process for all businesses, including startups, by shrinking the time for a smooth transition while dialing up uncertainty to levels where it’s not even clear how to prepare.

That perhaps explains why VCs signaled only a low level of concern about what might happen to EU-U.K. data flows in a “no deal” scenario.

The idea that data might hit a hard border (because it’s outside the EU that the U.K. will be treated as a third country and will need to apply for an adequacy agreement to enable the continued legal flow of data from the EU to the U.K.) doesn’t seem to have sunk in with many of the investors we spoke to.

Perhaps this is understandable, given the globalized world VCs are accustomed to. But perhaps there’s also a touch of complacency — or even just disbelief that the government is seriously intent on driving the country off an economic cliff.

Again, when uncertainty passes a certain threshold, what can you even do to insulate against such extremes? Hoping for sanity to prevail — for politicians not to actually “fuck business” — may feel more logical than trying to respond rationally to the irrational.

“I think most of us are quite complacent about [a “no deal” Brexit risk],” Entrepreneur First’s Matt Clifford told us. “Most of us assume, or have assumed for a long time, that this is a grown-up country where crazy stupid stuff doesn’t happen — and that may come back to bite us. If we really do do something monumentally stupid, most of us are probably working on the basis that a grown-up will step in at the last minute and maybe they won’t.”

Clifford also highlighted the ideological madness of the current Brexit debate — with its purist focus on “leaving.” Okay, so you’re going to “get out” come hell or high water, no matter the consequences for people and business — then what?

“‘No deal’ is a journey, not a destination. It is impossible for us to have ‘no deal’ forever in the sense that we have to have a relationship with [the EU] — or literally Europe is the one area in the world where we’re not going to have any relationship? But that seems pretty absurd. So at some point we are going to have to revisit all these issues — and that’s not going to go away,” he predicts.

An end in sight for Brexit is certainly not being predicted by any investors — who understand that ‘brexiting’ (be it on October 31 or at an unknown later date) will just be the start of a long-term process of the U.K. trying to figure out what the hell Brexit means. Reconfiguring your national and political identity certainly sounds like a very long-term project, indeed.

But again, there’s a sense from some investors that founders, being relatively insulated in the tech bubble, shouldn’t overly worry about this political stuff.

Sure, the madness will be going on around them, but they should stay focused on product and execution and try to ignore the wider Brexit-based anxiety that’s flushing the rest of society.

“The more you are in the U.K., the more time you spend there, the more you’re being inundated,” said Mangrove Capital Partners’ Mark Tluszcz, who worries far more about big tech brain-draining the U.K.’s talent pool than what havoc Brexit might wreak. “I guess the proxy is if you were American and living in the US you would obviously think the world was going apart by just following the tweets of the president. It’s like this never-ending noise.

“In Barcelona [where Tluszcz is based] we had this… around the whole independence movement… A couple of years ago that was the anxiety: Should I set up my startup here, yes or no? If I do am I going to be able to service Spain and the rest of Europe? Two years later you see that that was all just worthless anxiety — and the founders should just have worried about building their business and building a great product and just being relevant to the world.”

For investors, the most upbeat discussion areas upon which Brexit impinges and intersects are funding and immigration — with, on the latter, at least some hope of a reboot in attitude now that the architect of the Home Office’s ‘hostile environment’ (Theresa May) has passed into political history.

Hope, yes but not confidence. The current government does not inspire any such positive faith among the VCs we talked to.

On funding, concern seemed very low. Government steps in the wake of the referendum to respond to retracting European investment appear to have smoothed any immediate cracks. This while the strength of the UK ecosystem to keep attracting outside investment in spite of Brexit does inspire confidence among tech investors who expressed faith that the quantity and quality of U.K. talent wasn’t about to take a massive hit from Brexit.

That said, on funding, you could argue that the low value of the pound — which crashed immediately after the referendum; has languished ever since; and is predicted to hit parity with the dollar if a “no deal” Brexit comes to pass — has rather more to do with it.

Simply put, foreign buyers holding other currencies than Sterling can now get a lot more equity or acquisition for their buck or their renminbi because the pound is crazy cheap.

A flood of foreign capital coming into the UK in the short term in response to the pound crashing is not, therefore, surprising — nor necessarily a reason for the tech ecosystem to be cheerful.

A recent piece of Dealroom.co research commissioned by Tech Nation and the Digital Economy Council found that UK tech firms pulled in $6.7BN in funding in the first half of this year — more than half of which ($3.7 billion or 55%), came from American and Asian investors. The total in the first half was also more than was invested in the whole of last year.

But this flood of foreign cash raises the wider question of whether it’s good for the U.K. tech ecosystem, longer term, if foreign investors are able to swoop in and grab businesses and IP on the cheap.

The impact for U.K. founders and startups of the Brexit-inflicted currency crash might take longer to emerge — and be more existential — than considerations of replacing immediate cash flow needs.

Like everything to do with Brexit, it’s the complex interplay of factors that’s the thing. Brexit confusion, uncertainty and complexity certainly make it an ongoing business nightmare — one that’s both difficult to predict and horribly hard to respond to.

We spoke to eight European VCs to get a sense of how they’re preparing for a “no deal” Brexit, and how founders in their portfolios are dealing with what are now unthinkable extremes of operational uncertainty. Interviews have been lightly edited for clarity.

Harry Briggs, managing partner, Omers Ventures

The three steps we’ve been recommending to portfolio companies are:

1. Getting all EU citizens to apply for an EU settlement scheme and preparing for work visas for any U.K. citizens working on the continent.
2. Getting an EORI [Economic Operators Registration and Identification] number to be able to export to Europe.
3. Fintech companies have mostly already moved their regulatory HQ to Dublin or Paris or elsewhere in the EU to make sure they fall under harmonised banking regs — but if they haven’t, they probably should now

Clearly, if they were manufacturing companies (which our portfolio companies aren’t) then I’d be encouraging them to stock up on any critical EU supplies — to mitigate for delays at the border; and add warehouse capacity on the continent.

The harder question is how to prepare for the second-order effects: If “no deal” side-effects plunge Britain into a deep recession, are we prepared for the drop-off in orders and the knock to confidence? Do we have back-ups in place in case of power cuts? Do we have a remote working plan in case of transport chaos?

I don’t want to be alarmist, but it’s very hard to predict how the country will cope with the knock-on effects of trade blockages. Remember how the country almost ground to a halt when a few lorries blocked the petrol refineries in 2000? I think it would be near-impossible for the government to be fully prepared for every eventuality in such an unprecedented situation, so it’s worth thinking about some of the more extreme scenarios.

Thankfully, nimble tech companies are probably better able than most to weather the storm — and whilst it’s depressing that politicians have let us down so royally to make “no deal” even conceivable, we shouldn’t forget that we do still have far and away the biggest and most vibrant tech ecosystem in Europe.

Matt Clifford, co-founder and CEO, Entrepreneur First

The immediate concern [about a “no deal” Brexit] is no one really knows what it means. Even now. So it’s very very hard to plan for. We’ve obviously taken advice from the relevant government departments, but it’s very unclear what it means. Partly because we don’t know what the immediate reaction to it will be.

Clearly it could range from disruptive to very, very bad. And the truth is I don’t think anyone knows. A good friend of mine is a civil servant in charge of “no deal” planning and co-ordination — and he doesn’t think he knows what will happen. So anyone who tells you they do I think is wrong. As a result I think that means just enormous uncertainty — which is really very difficult to plan for.

I do think the tech industry is probably one of the most resilient to Brexit in most normal circumstances. And I think that’s because actually, whether by design or accident, a lot of the policy framework that’s been put in place over the last five years actually has made the U.K., for tech, a pretty open and liberal place to do business. I think the complication of “no deal” is less that — I think all those safeguards will hold, both around talent and around capital, which are the two main things. I think the bigger challenge is we just don’t know really what will — what exactly it means.

I’ll give you an example. One bit of advice that we got was whether the stakes that we hold in various different European entities will still have limited liability in our holding block. Now it sounds minor and technical — but if the answer’s no then that’s a pretty dramatic change that has all sorts of tax and regulatory implications.

The way I would think about it is that things that seem very important to me right now — like understanding exactly whether I have limited liability in the dozen investments I have in Germany or in France — that seems like a big deal but I can see that it won’t be a huge deal for the government because they’ll be worrying about medicines and fresh water. I’m only slightly exaggerating. What I mean is, I’m sure that they will figure out the medicines and fresh water thing. I would hope so. I just can see that things that in normal times would be pretty high on the priority list — like status of investments in Europe — will be pushed down the pecking order and that is a little bit nerve-wracking.

Again, we’ll figure all this out eventually — it’s just more the level of complexity that “no deal” brings with it. The point of the implementation period [if the U.K. left with a withdrawal agreement rather than with “no deal”] is to have two years to figure this stuff out.

I didn’t vote for [Brexit]. And if I could press a button and reverse the whole thing I would. But I have to say that’s mainly for non-professional reasons. It means that I’m actually pretty optimistic about post-Brexit Britain — as a tech hub — but I think “no deal” gives us an environment in which it’s going to be very difficult to [understand], at least for a few months, what it really means.

There are a lot of boring technocratic things that we can and are doing like looking at how we structure our European subsidiaries and looking at how we pay our staff and this sort of thing. But, to use that awful phrase, it’s the ‘unknown unknowns’. There’s a lot of things you can plan for, they’re typically dull. Like we’re not going to run out of capital. We don’t think any of our staff will be kicked out of the country. That sort of thing. If it’s the predictable “no deal” then it’s certainly not what we hoped for, but you can just take the somewhat dull but tick-box approach to making sure that your main risks are covered.

The thing is, we’ve spent 40 years entwining our political, social and legal systems. To undo it all in two months — it’s not that there’s any one thing I can point at and say that will be the disaster but, just, if we know anything about humans it’s that they tend to overestimate their understanding of complex systems… My worry is less like ‘oh shit we’re going to have to kick everyone out’ and more like what is the thing that’s probably 101st on Brexit and the EU’s priority list that happens to have a big impact on us?

There are things you can do to mitigate the obvious things that could happen but it’s just very hard to say exactly how these things will be treated. The spiel of course is that we’ll have these mini deals that will ensure continuity etc. etc. but no one really can say whether or not that’s true of course.

So it’s a very bizarre situation where no one really has been able to give a full [picture] of what might happen. Or at least not that I’m aware of.

I think it’s clear that we’ve got a great visa system for tech in place in the U.K. I think things like the British Business Bank have helped fill the EIF [European Investment Fund] gap. Most of the venture capital firms in the U.K. have a lot of cash on hand etc etc. So I’m actually — as I said —a big picture optimist.

[But] thinking about things like our health tech companies that deal with data across Europe, you can’t unpick that in two months. You just can’t. It’s incredibly complex and there will be a lot of judgments that have to be made in Brussels, in London and by individual companies.

My guess is most people will try and muddle through — and that will work most of the time but again it will be the edge cases that are the real challenge.

There are a few things that [founders] can do [to prepare]. Right now probably most of them are not going gung-ho on bringing EU citizens to the U.K., for example. We’re being reassured that they’ll be no problem with that but the actual mechanisms for that on the first of November are unclear. It’s definitely going to have an impact on things like hiring in Europe.

It’s like any business-uncertainty environment: There are a lot of things you don’t start doing when you face uncertainty. I do think the general attitude — at least from the founders that I speak to is — well, we’ll just muddle through, we’ll try and tick the boxes and other than that we’ll try and keep going.

If you go on gov.uk, there’s a mildly “amusing” link in the top corner for preparing for Brexit. And you read it and it basically says there’s not a lot you can do really. I mean I’m exaggerating but… it basically more or less says “well, we don’t really know what’s going to happen.” The guidance is helpful but it does acknowledge that there’s a long way to go before we know what it means.

The data [flows question] is a good example. As are things like trademarks. No one’s that clear on what will happen to all this stuff. There are endless publications on what might happen if there’s a no-Brexit deal. They don’t tell you what to do, of course. They just warn you about what might happen. Some of it’s almost like one of those uninsurable risks — where you think this will be bad but there’s not much else you can do. I think it will at least hold off some investment and hiring in the short run.

The big challenge was always going to be the European Investment Fund, which was always a very active LP in U.K. VC but… straight after the referendum, the government did take action to boost the British Business Bank and now British Patient Capital I think that’s gone a huge way to fill in the gap.

The reality is London is so far ahead of any other center in Europe as a center of venture capital that actually I don’t think there’ll be a huge issue for startups. Empirically, we’re not seeing a reduction in the amount of fund formation in the U.K., we’re not seeing any changes to the excitement, say, from Silicon Valley investors — who, if anything, I would say seem to be spending more and more time in the U.K.

I think that’s true also… of Asia. We’re certainly seeing at our demo days 100-plus non-European investors coming to look at the companies. So I’m not so worried about the funding side. Again, not what I would have chosen. But I think we’ve good reason to be optimistic about that.

I’m a very, very long way from being a brexiteer, but if I try and put myself in a smart brexiteer’s shoes, then if you really believe this is going to have all these positive impacts down the road then uncertainty now is the price worth paying. But we’re sort of getting to the point where it does feel like we need a little bit more clarity about what it really means and will mean in practice.

There’s a tonne of challenge, but being optimistic we do want to look beyond and think about what we’ll be able to do afterwards. And I am — although I’m not a supporter of this government — I am encouraged by the change in tone on immigration since the new prime minister took over, which is very, very different to what it was… I remember various brexiteers who I do respect telling me that post-Brexit Britain will be able to be more liberal on high-skilled immigration. I’ll believe it when I see it but there are encouraging noises on that. And I think we should at least recognize that.

Imran Ghory, partner, Blossom Capital

I think for our European portfolio companies we expect it to be largely ‘business as usual’ — but for our U.K.-based teams, it’s definitely something that’s on the radar.

Most of our startups with international expansion plans are naturally holding cash in dollars which should also help mitigate any decline in GBP as a result of a “no deal” scenario.

However, hiring is the main area where we see startups being impacted. Talent is what makes or breaks companies, and our portfolio companies naturally seek to hire the best engineers and product people wherever they’re from.

Luckily many already have experience with the visa process having hired team members from the U.S., which should make the transition easier. However, it’s still unclear what the EU national visa process will look like post-Brexit.

Vishal Gulati, health partner, Draper Esprit

As an investor I’m always helping startups manage the uncertainty around their business, and there are a number of conversations we are currently having around the risk of a ‘no deal’ Brexit. The first is around currency — especially as the pound is depreciating and most tech startups sell their products internationally and buy products and services overseas, this clearly needs to be managed carefully.

The second conversation is around the regulation around sending and receiving personal data and medical devices. The transfer of data within the single market is relatively straight forward as personal data is protected through the EU’s unified data protection scheme.

If the UK crashes out, we will have to gain an ‘adequacy decision’ from the EU to verify the transfer of data to and from the EU in order to comply with GDPR rules. This process takes time and many startups risk being in limbo as this agreement is come to. My fear is that in the case of ‘no deal’ actually happening immediate priorities of UK government may lie in dealing with food, medicines and fuel and data may not be on the top of the agenda.

The third risk is that the end to free movement of people prevents startups hiring. Yes, often they do need to hire what the government deems ‘highly skilled people’ which they are making allowances for, but startups cannot always afford employees that cost over £36k. In fact, most founders don’t pay themselves until they have raised sufficient capital, or leave their employment to start companies, most work visas don’t allow this.

So there are a number of issues, but as with any challenge, planning early is key — yet we may not know what might happen until the last day! Startups are used to pivoting quickly, and so I suppose, they will find ways around these.

Damien Lane, co-founder and partner, Episode1

We’re a very early seed investor, so macro economics/politics don’t really impact us that much, so we don’t really think about it from a portfolio perspective. Very few of our companies have revenues of more than £5M per annum.

An early stage company has many many challenges, I don’t think Brexit would feature in the top ten for most of our businesses. The obvious challenge is hiring — but that really depends on whatever the post Brexit government decides to do on immigration.

To that extent, the prime minister’s indication that he favours a points based system is very positive — assuming that highly qualified engineering types will get lots of points, so should find it easier to get into the UK than is currently the case. And if you were being very optimistic, you’d say that such a system will allow UK companies to hire from all over the world, not just from the member countries of the EU. But that assumes that the government is well run — a stretch, given the recent history ;-)

I think that from a specific tech industry perspective there is a lot less to fear than is generally thought. In contrast to the automotive, agricultural and general manufacturing sectors which have physical supply chains etc, tech is far more fluid and borderless. I wouldn’t want to be an auto worker in the North East, for example…

Funding is the other issue, but we’ve seen absolutely no sign of a slow down in follow on funding rounds for our UK companies — if anything, the climate is as buoyant as I’ve seen. We have more than one company talking to investors about £50M rounds plus, and you will have seen that Daimler invested in our largest portfolio business, Carwow, a business that one would think was as exposed as any to a potential Brexit hiccup.

So… overall, I’m far less pessimistic than many.

[On data flows] I hadn’t thought of that specific issue, but honestly, I file that in the same folder as flights being grounded, medicines not moving across border etc. I can’t see it happening. Chinese companies have data on EU citizens, don’t they? And I’m pretty sure that they’re at least as intrusive in terms of state surveillance as the U.K.

But… most of our companies don’t have any customers (let alone EU ones) so it’s not a focus for us.

Stan Laurent, partner, Highland Europe

For three years now companies have lived in complete uncertainty with regards to Brexit. Not much has changed. Uncertainty remains the word.

Highland Europe invests in leading tech businesses. They almost always operate globally but with sets of rules and processes that are established and proven. Most portfolio companies will want to gain time for things to settle: Ensure staff applies for permanent residency, stock inventory for e-commerce businesses, etc. These are agile businesses, so they’ll delay bigger decisions till the path is clearer if they can.

The biggest impact of a (“no deal”) Brexit for (non-regulated) digital businesses is on recruiting talent. We advise businesses to double-up their efforts in this area. In some cases it may involve accelerating plans for new development centres outside the U.K.

Mark Tluszcz, co-founder and CEO, Mangrove Capital Partners

Brexit is creating a great deal of anxiety and some administrative pain but other than that it is a non-event for startups. It is probably easier for me to take an objective view given we are well-diversified across Europe, Israel and the U.S. Startups in the U.K. should be much more worried about large multinationals such as Facebook and Google poaching their employees. If I were Boris Johnson I would do more to create a level playing field for startups because the UK is at risk of losing its golden goose to mind drain.

What happens is if you’re running a startup in the UK or thinking about setting up a company in the U.K., half the conversation is around how life is going to be horrible after Brexit. So this creates a certain level of anxiety. You’re saying am I going to do it? Not do it?… And it’s like everything — it’s anxiety that is difficult to qualify and quantify. Because you really don’t know what the world is going to look like the day there’s a hard or soft exit. Nobody knows. There’s tonnes of different scenarios. We tend to think, as a firm, that the sooner the U.K. is out the better. Everybody can get on with living. And once the new reality is set, everybody adapts to it. But without having that new reality that’s what I mean there’s this anxiety. Am I going to be able to attract the right people? Am I going to be able to hire people into the U.K.? Am I going to be able to open subsidiaries that make sense? Am I going to have access to the European market? These are all questions that U.K. founders never had to ask before.

And of course, at the end of the day, it’s easy to paint a picture that says life’s going to be much harder for you after. It hasn’t stopped American and Chinese companies to come to Europe. It hasn’t done any of that. What it might do in the short term is if I have to say open a subsidiary as a U.K. company in a French market — there may be a few more little administrative things I have to do because there won’t be so much passporting and there’ll be some difficulties. But I think of all those as just administrative, very small hurdles. Which today — like all good mirages — look big, right? They look like they’re daunting. If we in the U.K. leave, we’re going to be cut out of Europe! Well if that were true, how are companies succeeding elsewhere to come to Europe? So it’s not true. It’s not true of course. And that’s the anxiety I’m talking about.

My comments are relevant only to this specific tech innovation market. If I were a wine producer in the U.K. I might feel different, and a car producer and so on. But I think in the innovation sector, particularly in tech, we live a bit in a parallel world. In a world that first promotes the success of innovation and if you are successful people are going to use your product no matter where you’re based. And even post-Brexit it’s not as if the U.K. is Africa. It’s still going to be the U.K. — with a great innovative mindset. A culture of innovation. That’s not going to go away, post-Brexit. That will remain strong.

In the short term there are anxieties. We can see it the financial services market — massive anxieties. But that’s mostly because they know that as a U.K. company you’re going to lose your passporting service into Europe and so they’re moving many functions from London to Luxembourg, to Geneva, to Paris and other markets. Who are using that anxiety to attract them. I know we in Luxembourg — one of our number one tools is preying on that anxiety… The politicians are saying you’re life’s going to be over, come to Luxembourg and you’ll be fine.

This anxiety is largely — I think — non-factual. It’s there, it’s sitting out there. I don’t know, frankly, many startup founders that are spending a lot of time thinking about this. I don’t think they’re anxious. I think the world around them is very anxious. But if they are they shouldn’t be. Whatever deal happens — I’m not for or against one way or the other — it’ll just reset the new reality and these startups are going to have to compete like they did before. They’ll be some administrative additional things… but the U.K. is such a breeding ground of talent and opportunity that it’s not going to change quickly, at least for startups. In my opinion.

If I were a founder in the U.K., my biggest worry shouldn’t be Brexit. It should be Google opening up a campus with 8,000 people. Because I’ve seen that movie before. And the proxy for what’s happening there is Tel Aviv. I’m very active in Tel Aviv. As the chairman of Wix, our staff get bombarded by offers — Google and Facebook and Amazon — just brain-draining our companies. To such a point that the startup community in Israel is very worried. At Wix we’re strong. We’re worth $7 billion. We can do a lot of things. But if you’re just starting a company in Tel Aviv today, one of your greatest concerns is can I hire enough good people?

Tel Aviv is small — much smaller than the U.K., for sure. But the U.K. talent pool is not infinite. And the more of these companies come, the more they’re going to be fishing in that same talent pool — and so when I read that Google was coming, I think that’s a travesty to the U.K. tech scene. Not a positive. And I say it because I’ve seen it happen… So I tell all the founders in the U.K. you need to be much more worried about that than about some thing called Brexit — which in two years, or hopefully by October, is resolved one way or the other. Who knows if it will — but in the next couple of years that gets resolved.

There’s not an infinite pool of talent. Silicon Valley has been able to create an infinite pool of talent because they can bring people from everywhere — up until the Trump administration getting visas was quite easy. We’ll see how that plays out. But ultimately it’s about that. The Brexit anxiety I think is way overdone at this point.

James Wise, partner, Balderton Capital

I don’t think there has been a board meeting or update email that hasn’t covered some issues arising from some form of Brexit for a year now. Most of our founders have been making alternative plans for dealing with Brexit for many months and we have had permanent legal advice in place to support them since the referendum in 2016.

Technology companies are, generally speaking, mostly reliant on access to talent, capital and a supportive regulatory environment and so less susceptible to the same level of immediate disruption as physical goods, medical and food supplies. And, generally speaking, they are designed to be more agile, and so able to react quicker to most circumstances than larger, older businesses.

However, sadly for the U.K., this has meant some of the fastest-growing companies in the country have set up offices on the continent to deal with potential fall out from Brexit, which means resources and jobs have already been diverted away from the U.K. and will continue to be so for the foreseeable future until we have greater clarity on access to talent and the regulatory environment.

A “no deal” scenario drastically extends this period of uncertainty. This is being felt acutely in more heavily regulated industries such as fintech and healthtech, where common frameworks across the U.K. and EU, affecting markets from payments to clinical trials, now look certain to be temporarily if not permanently ended. We are also working through legal advice on the use of data in line with GDPR [the General Data Protection Regulation] for all our companies.

Beyond issues of the end of our regulatory union with Europe, we have also seen the establishment of offices on the continent for recruitment of EU and U.K. nationals. Paris, Amsterdam and Dublin have been the major beneficiaries to date. While mostly these are smaller subsidiary offices, the impact of a “no deal” scenario on the access to talent, and the willingness and ability of EU nationals to move to the U.K. will determine if some companies decide to move their HQ to the capital, as well. We hope that the U.K.’s ongoing visa environment supports U.K. companies to attract talent from anywhere, and vice versa that British talent still has the option to work abroad when relevant, but this has yet to be made clear.