A CLEAR majority of Scottish start-ups have signalled their belief that the UK leaving the European Union (EU) will harm the country’s rapidly-growing tech scene.
Four out of five (81 per cent) start-ups surveyed by Informatics Ventures, the organisation which supports Scottish technology companies, said the vote to leave the EU will be bad for the sector, with only nine per cent believing that it will be good.
And the survey, of more than 100 start-up founders and senior advisers, underlined that access to investment, selling products and services into Europe, and the ability to attract and retain staff, are among the biggest concerns held by Scottish tech companies since the Brexit vote.
The findings are said to confirm the anecdotal picture built up before the referendum on June 23 that the “vast majority” of Scottish start-ups did not support the campaign to leave the EU.
That view had been crystallised the day before the referendum by John Peebles, chief executive of fast-growing software firm Administrate, who said membership of the EU had benefited the business through freedom of movement throughout the trading bloc and access to grants.
However, despite the overwhelmingly negative sentiment captured by the survey, tech companies did flag that the Brexit vote may boost export business because of the drop in the value of sterling.
The survey found that 44 per cent of tech companies believe that the Brexit vote will have a “significant” impact on their ability to raise new investment in the short to medium term, versus 18 per cent who believe there will be no effect. On attracting and retaining talent, 40 per cent expect Brexit to have a significant impact on their short to medium term plans, against 22 per cent who believe it will have no effect.
More than one-third (34 per cent) of tech companies surveyed said the Leave vote will affect their ability to sell products and services into Europe. Nearly one-quarter (24 per cent) believe there will be no impact on exports into Europe.
Mr Peebles said: “Start-ups really need three things: capital, easy access to workforce, and no distractions from their core mission.
“Leaving the EU puts capital at risk as EU funding will probably dry up and the UK won’t be seen as the natural and logical entry point for North America to the EU.
“Mobility of labour is very concerning for us as half our workforce is foreign and the visa process for non-EU people is arduous, expensive, and time consuming. Distractions will occur in the form of questions around free market access, data protection laws, and other legal annoyances.”
Steve Ewing, programme manager of Informatics Ventures, set up to foster innovation and entrepreneurship within Scottish start-ups and spin-out companies, said the Brexit vote had “created considerable uncertainty”. He said the vote brings the potential to present “significant challenges to attracting and retaining staff and also to raising new investment which is a big issue for start-ups at the best of times”.
Mr Ewing added: “Looking closer in, the picture is somewhat more nuanced with most respondents thinking not much will change significantly over the next year or two and some suggesting a weaker pound may help boost exports. As a group, entrepreneurs can be more flexible and less fearful of change – and these initial findings bear out a sense that opportunities may arise from the current situation.”
Cally Russell, founder and chief executive of Edinburgh-based shopping app Mallzee, signalled his view that Scottish tech companies will continue to attract investors, in spite of the Brexit vote.
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