Business development · 3 April 2017

UK tech startups double in number after Brexit vote

Tech investment
Investment in the UKs tech sector remained strong even after the EU referendum

The number of tech startups in Britain has more than doubled since the EU referendum in June 2016, according to new research.

Analysis of Companies House data, by auditing firm RSM, showed the number of operating technology businesses reach 5,995 by the end of February 2017 – 3,670 more companies than the figure recorded in the days after the Brexit vote.

London remains the dominant home of digital businesses in Britain. In the eight months following the referendum, 1,741 new firms were incorporated. According to Tech City UK, a tech startup is now founded every hour in the capital.

However, other regions saw a significant increase in the number of new tech startups to contribute to growth in the sector.

Some 274 new firms in the North West of England saw the region’s community of tech startups reach 449, while 248 new companies were registered in the East of England since 30 June 2016.

Karen Bradley, government culture minister, recently said that success in the digital economy was “driving growth across the whole country”, and tech companies based outside of London received more investment than those in the capital for the first time in 2016.

Further research has confirmed the UK’s dependence on the “digital economy”, as job creation in the tech sector grew at twice the rate of the wider economy in 2016 to create 85,500 new positions in 2016 alone.

In response to the figures, Richard Heap, a technology partner at RSM said the sector’s reaction to the Brexit vote, when many predicted high-growth tech startups would be tempted to move to other European states, was testament to the “entrepreneurial spirit” of founders.

“London continues to be the hotbed of tech activity, accounting for almost half of all new tech company incorporations over the last eight months, but we are also seeing strong activity outside the capital, particularly in Manchester and across the home counties,” Heap added.

In January, it was reported that Britain’s tech startups received more investment than any European rival in 2016, reaching £6.7bn by the end of the year. Heap suggested that attractive tax schemes and the falling value of the pound had boosted investment in the sector.

“Angel investors, venture capitalists and private equity firms continue to support and invest in the UK tech scene, with overseas investors particularly attracted by the current weakness in sterling. The availability of tax breaks such as the Seed Enterprise Investment Scheme and the Enterprise Investment Scheme is also helping to encourage investment activity.”

However, Heap warned that startup growth in the digital economy had led to increased competition for skilled staff, and future prosperity could be dependent on the status of EU workers following government Brexit negotiations.

“The downside of this surge in activity is that the war for top talent is fiercer than ever. As the proportion of EU workers in the tech sector is far higher than the average – up to a third in London alone – many business owners will want an early resolution to the issue of the status of EU workers in addition to clarity over their ability to recruit overseas talent post-Brexit.”

Additional research has suggested that the digital skills gap could be widened by the tendency for tech workers to retire at state pension age earlier than other industries.

“The tech industry is facing an expansive experience exodus. The early retirement of the baby-boomers’ generation could lead to a serious skill shortage in the sector,” said Ruth Jacobs, managing director of Randstad Technologies, the recruitment firm that undertook the study.

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ABOUT THE EXPERT

Simon Caldwell is a reporter for Business Advice. He has a BA in politics and communications from the University of Liverpool, and previously worked as a content editor in the ecommerce industry.

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