20% of UK Startups Expect to open a European Outpost due to Brexit

Silicon Valley Bank (SVB) released its Startup Outlook report today. The report, now in its fifth year in the UK, is based on an annual survey of technology and healthcare startups that gauges their perceptions on business conditions and Brexit, as well as fundraising, hiring and policy issues. This year’s survey included responses from more than 940 startup executives across the UK, US and China.

The Brexit findings in our survey this year are compelling and we are pleased to bring some data to a conversation that has been largely anecdotal,” said Phil Cox, Head of EMEA and President of Silicon Valley Bank’s UK Branch. “While 21% of innovators say they will be opening European outposts, the majority will continue to back Britain as the home for their headquarters. Businesses are seeing more opportunity than fear, which can only be a good thing. Though startups are feeling less optimistic about 2017 than they were about 2016, even more are looking to grow their workforce this year. Not without challenges, but the British technology industry is not slowing down.”

Cox continued, “The UK is an excellent place to start a business. The elements that led to the growth of the UK’s innovation ecosystem include strong universities, a small-business based economy, a clear legal system, successful role models and availability of funding irrespective of business size. Brexit may give us opportunities to address concerns about overall competitiveness within the EU by focusing on the factors that drive business innovation and success. The focus will be on simplification, easing contractual arrangements, encouraging investment and competitive taxation.”

Here’s what UK-based startups are saying about their sentiment in 2017:

Business conditions

  • 48% of UK startups expect 2017 to be better than 2016, down 10% on last year
  • 16% say this year will be tougher; 36% say business conditions will be the same as last year
  • Despite that, 89% of UK startups are expected to grow their workforce in 2017, compared to 79% in the US

Brexit

  • 62% of startups are not planning to open a European outpost as a result of the Brexit vote
  • 21% of UK startups say they are remaining in the UK but are opening a European outpost
  • 11% are thinking of moving their HQ to Europe, 5% are thinking of moving their HQ elsewhere (outside of the UK and Europe)
  • 1% are definitely moving their HQ to mainland Europe
  • The top five issues facing startups in light of Brexit are:
  • Non-British employees are worried about their long-term opportunities in the UK (32%)
  • Attracting VC funding is harder (21%)
  • Increasing cost of running a business (21%)
  • Harder to attract European talent (12%)
  • Selling into Europe is harder (7%)

Fundraising

  • 81% said the fundraising environment is somewhat or extremely challenging
  • 56% of startups expect their next source of funding will come from venture capitalists, up 16% on 2016
  • 55% said their realistic long-term goal is to be acquired; 16% said their goal is an IPO
  • 85% of startups expect to see at least the same number of acquisitions in 2017 as last year

Talent

  • 76% say access to talent is their most important public policy issue (up from 61% last year)
  • 96% say it is challenging to find people with the right skills to grow their business
  • 36% say the lack of access to talent has inhibited product development and 32% say scaling their operations is tougher as a result

About the survey

  • 50% of the UK respondents will be profitable in 2017, 11% are pre-revenue
  • 93% of UK respondents are private companies and 7% are public companies
  • 59% of the companies surveyed have been established within the last five years
  • 136 of the 940 respondents are from the UK

Author: Dylan Jones

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