Brexit cash squeeze hits UK tech as pessimism climbs

New report suggest mainland Europe is far more positive about the tech industry

Brexit

The UK is the only country in Europe where technology founders say it's now more difficult to raise cash for new ventures than it was 12 months ago, according to a new report.

Atomico, a European venture firm that charts the success of technology sectors across the region, has released its third edition of the "State of European Tech" report, finding that while European tech as a whole has boomed over the past 12 months, the UK has become more pessimistic about future success.

2017 has been a record year for European tech, having seen more than $19 billion invested in regional startups and over 50 fundraising rounds securing $50 million or more. So far seven European companies have achieved the billion dollar "unicorn" status, bringing the total to 41 for the region.

What's more, the UK was able to attract the biggest influx of new talent for the period, taking in 21.5% of all tech workers migrating to Europe, according to the report. The biggest attraction has been the UK's burgeoning AI sector, which alone has seen 1 billion of investment since the leave vote. 

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However, despite investing 5 billion into the UK in 2017, compared to only 2.3 billion in Germany, the tech industry believes the vote to leave the European Union and the exit process has made it more difficult to hire talent and secure investment.

In a survey of 3,500 tech investors and leaders in Europe, the majority (52%) said the triggering of Article 50 was the most material event to have impacted the industry over the past 12 months. In the UK, 18% of respondents said they were less optimistic about the future of the tech sector than they were 12 months ago, three times as many as those in Germany and France.

Jimmy Wales, founder of Wikipedia and WikiTribune, commented in the report: "Compared to 12 months ago, I have actually got less excited about European tech and the European tech scene. 'Less excited' is maybe not right the word... 'more pessimistic.' I am deeply concerned about, frankly, the train wreck of Brexit. I am afraid of it spiraling out of control."

UK respondents also said that the Article 50 exit process has created heightened uncertainty and risk around investments, while those outside the UK said mainland Europe had become more attractive for the relocation of HQs and employees. 

France is perhaps the most exciting place to be a tech player right now, with the region seeing a noticeable injection of optimism since the election of Emmanuel Macron.

The news won't come as a surprise for the many UK tech leaders that have already expressed concerns about the government's exit strategy. A poll by service provider Avande found that 70% of tech leaders were worried about the plummeting value of the pound and potential stagnation as a result of a lengthy negotiation process.

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Infrastructure firm Interoute found in June that 40% of companies were nervous about new investments under Brexit, while 38% said they had turned to cloud-based systems to ensure they have greater flexibility in the future. 

However, it's not all bad news. Tech talent in Europe is growing three times as fast as the overall EU average, according to data scalped from LinkedIn and Stack Overflow. There are now twice as many PhD graduates emerging with STEM-related qualifications in the EU than in the US. This is helping to fuel a hiring surge that's an increase of 17% in the number of new developers over the past 12 months, with 5.5 million now employed across Europe.

Europe is also leading the way in IPOs, with more companies going public in the region than anywhere else in the world. This is thought to be thanks to a much healthier post-IPO trading market, where EU companies are trading 24% higher than their IPO prices on average, compared to just 6% in the US, according to the report.

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