Red tape could stem startup Brexit exodus as tech hits government agenda

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It was just two weeks after the Brexit vote that the city of Berlin sent a billboard van around Shoreditch beckoning London tech firms to move to the German capital. However, firms that took up the offer have found the German city to be lacking London's supportive, tech-friendly environment.

At least two startups have wrangled with setting up offices in Berlin. Brickvest, a fintech startup founded in London by two Germans, revealed the German banking regulator BaFin did not make it easy to apply for a banking license while web design company MBJ London said registering the company, setting up a bank account and finding office space had proven more challenging than expected.

Both firms had already planned to open offices in the city but sped things up in the wake of the vote and with the view to making it their main location if there is to be a so-called hard Brexit that would end passporting and access to the Single Market.

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"Passporting is a deal-breaker for us," said Brickvest co-founder Thomas Schneider.  "I'd be surprised if the UK can cherry pick [what it gets in Brexit]."

London is a "no-brainer for now," he said, but there was no clear leader for which location might take the capital's crown in terms of finance or technology, and it would be more likely that many cities would each get "a slice of the cake", adding that Berlin was "not really tailored for fintech".

Michael Kent, co-founder of London fintech startup Azimo has ruled out Berlin as a potential location for a new European base after Brexit.

While it ticks man boxes for a startup, the challenge of working with regulators ruled the city out. "I don’t think it’s an easy place to get regulated," he told City PM.

"With Bafin, they like to stick to the rules. Certainly in payments, if its not actively permitted, it’s not permitted. Whereas UK regulators and others have been more open and flexible.

"It wouldn’t be the first place on my list to set up a regulated business," he said, adding that the firm is now considering Dublin, Amsterdam and Luxembourg.

There is "zero chance" it will close its office in London, however, but the terms of Brexit would determine the balance of power between the two.

Government engages with entrepreneurs

Meanwhile, the government is seeking out the UK tech industry after Brexit as officials from across departments engage with the sector about its role in a Europe-free economy.

Talks between the tech industry and government have ramped up in recent weeks as a roadmap for Brexit begins to be formulated.

And several of the UK's top startups will visit Number 10 on Friday for high level discussions with members of the Prime Minister's office.

It comes a day after trade minister Greg Hands toured Silicon Roundabout, taking part in a round table with entrepreneurs and startup founders with Tech City UK. He also toured Central Working and Google Campus which host many up and coming tech firms in the capital.

In recent weeks the tech body has also hosted the head of the civil service, Sir Jeremy Heywood, and the director general of the Department for leaving Europe, Sarah Healey.

While talks with digital minister Matt Hancock and secretary for culture, media and sport Karen Bradley and others within the department for culture media and sport have taken place since Brexit to feedback the views of startups, they are now being sought more widely across the government.

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The willingness to engage with entrepreneurs and founders eases concerns raised in the immediate aftermath of Brexit that a shake up of government and the huge task of leaving the EU could jeopardise the sector’s success as other matters took priority.

High up the agenda will be access to talent, an issue which caused outrage from young tech firms after suggestions by Home Secretary Amber Rudd that there may be a crackdown on visas for foreign workers.

Nearly 50 high flying startups this week signed an open letter calling on the government to ensure the sector can continue to hire the skills they need.

In addition to lobbying for the sector, there are hopes to push upon the government the importance of a comprehensive forward thinking modern digital strategy to the wider economy.

It's understood there are hopes in the tech sector that the digital economy will factor into the government's industrial strategy, despite the name eliciting thoughts of traditional heavy industries.

Efforts are also going towards educating Theresa May's newly installed teams on technology and the digital economy, which is worth billions of pounds to the UK economy and is growing faster than any other sector.

Chancellor Philip Hammond admitted at the Conservative Party conference that he was unfamiliar with many new technologies and the contribution of entrepreneurs, but said Britain now had a "once-in-a generation opportunity for Britain to cement its role as a leader in tech innovation".

However, the differing signals from Hammond and Rudd could raise a red flag.

"It raise the question of whether they are all joined up when they’re looking at all these sectors of the economy," said Tech London Advocates chief Russ Shaw, who welcomed plans to improve the nation's digital skills with free training, quietly announced at the Conservative Party conference.

"It does feel disjointed, when one person's saying good things and there’s a different message from someone else."