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Has Brexit already impacted on the UK’s technology sector?

In a move first reported by The Financial Times, Microsoft has recently decided to close the London office of Skype.

The company announced in a press release that it had “made the decision to unify some engineering positions”, putting up to 400 jobs at risk, as operations move to a new site in Paddington.

Coming so soon after the UK’s decision to leave the European Union, this might appear to be Brexit in action.

In the run-up to the referendum, we were bombarded with experts predicting that, not only would London lose its attraction for startups in the technology and FinTech (financial technology) industries, but that the UK could also lose many of its ‘unicorns’.

‘Unicorns’ are technology companies worth at least $1bn. The UK has the most of any European country, with 18 out of Europe’s 47; Skype is one such UK-based unicorn.

In a pre-referendum report for The Fintech Times, Ian Dowson of William Garrity Associates predicted that leaving the EU would be ‘catastrophic’ for the FinTech industry in the UK, and estimated “a loss to the UK of $5bn over 5 years” in terms of investment.

Similarly, Bloomberg Technology warned that leaving the EU would “threaten trade and regulatory benefits that have made London a hub for financial startups.”

However, despite the dire warnings, the post-referendum prognosis does not seem so gloomy. Gerard Grech, CEO of Tech City UK – a consultancy firm based in Silicon Roundabout, London’s technology sector – says there is “solid ground for optimism.

“If there’s one thing tech entrepreneurs are good at, it’s holding their nerve […] It’s these qualities of resilience, as well as risk-taking, that Britain’s tech stars will be drawing on now as they face perhaps one of the bigger bumps in the road yet. And I’m confident that they’ll make it over the hump.”

Entrepreneurial ability may not be the only reason for positivity: “The UK digital economy is growing 32% faster than the wider economy and is creating jobs 2.8 times faster.” There are currently 1.56 million people employed in the tech sector in the UK.

Grech also suggests that “the weaker pound should mean that foreign investors are keener than ever on UK startups”, and that: “Heavy-weight investors, such as Atomico […] state firmly that they will carry on seeking out the best companies in the UK to invest in.”

Furthermore, there is evidence that Microsoft’s decision had less to do with a declining technology sector and more to do with poor running of the company.

An unnamed former employee said that: “Skype is a shell of the company it once was”. Another former employee, Dan Wellman, commented: “I found it unusual that while I was employed there, over a very short timespan any manager that was originally a Skype manager was replaced by a Microsoft manager.”

Of course it is too soon to tell what the long-term effects of the referendum result will be, but perhaps the UK’s technology sector is not facing the impending doom that was predicted.

Image: Seth Schwiet

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