01 December 2017

How will Brexit affect Britain's start-up culture?

Whether you're a Eurosceptic or a Europhile, Brexit will change the way we do business here in the UK. We take a look at the potential impact Brexit may have on Britain's entrepreneurs and the funding they need to get started.

Despite concerns about the EU Referendum damaging confidence, a record 650,000 new businesses were registered in the UK in 2016.1 Factors that contribute to making the UK the 7th easiest place to do business and the 16th easiest to start a business in (according to the World Bank),2 include:

  1. Less rigid regulatory environment.
  2. Light tax regime – corporation tax is lower than any other major economy and capital gains tax is attractive for entrepreneurs.
  3. Talent pool that can draw highly-skilled workers from around the world.
  4. Availability of angel funds/venture capital.

On the downside, start-up businesses could feel the negative impact of a number of potential Brexit consequences:

  1. Weakening pound could lead to higher costs.
  2. Tighter immigration curbs could jeopardise the availability of skilled workers.
  3. Loss of Single Market access could be damaging to overseas trade.

Funding implications of Brexit

In addition to these very specific Brexit effects, general uncertainty and disruption could lead to a loss of consumer and business confidence. This, in turn, could have an impact on the availability of funds available for start-ups – in tricky economic times, investors may be less likely to back an untried business. On the upside, investors will be keen to seek opportunities, so if you have a strong business case, you will still be an attractive proposition.

EU funding

As the UK exits Europe, businesses will also lose access to the funds that come directly from EU membership.

The European Investment Bank, for example, has invested over €31.3bn in the UK economy of which 17 per cent funded innovation and smaller businesses.3 In the tech and life sciences sector, the European Investment Fund is a key source of finance, supporting 27,700 SMEs.4

In an attempt to counter this effect, the Chancellor announced that he is extending the limits of the venture capital investment programme delivered through the British Business Bank and creating a UK Guarantee Scheme to support major projects.5

What can do as a start-up

In the current uncertainty it can be difficult to plan, but that's exactly what you need to do if you're considering starting a business. Robust, well-thought out business plans, showing that you've calculated upside and downside scenarios, will be crucial in securing investment funding.

Whilst it can seem that every time you hear the news or open a newspaper, there's more reason not to act, the fact is that if you have a strong business idea, the experience to see it through and the ability to make a robust business case for it, the UK remains one of the world's most favourable environments for start-ups.

 

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