What would a second Scottish referendum mean for tech startups?


With the wheels of Brexit in motion, first minister Nicola Sturgeon has announced she plans to ask the UK government for permission to hold another referendum in Scotland, which would allow Scots to decide whether or not they want to be part of the UK.

Given the vast majority of Scottish voters opted to remain in the EU in June’s referendum, it stands to reason that Sturgeon would want to put the vote to the people once again.

The country boasts a thriving startup community with strong international and European connections, while many English SMEs have additional offices in Scotland.

The possibility of a second independence referendum raises questions on how this community would be impacted. We asked tech startups from both sides of the border for their thoughts.

Lack of clarity

“This really depends on the outcome of the negotiations following Brexit,” said Lee Murphy, owner of accountancy software company, Pandle.

“It’s entirely possible that the UK will have access to the single market without tariffs, which will mean little change for businesses whether they are in England or Scotland. If, however, there are tariffs imposed on imports or exports then Scottish SMEs will benefit more from being a member of the EU.”

Additionally, Murphy noted the imposition of tariffs could see some English SMEs potentially relocating to Scotland.

However, it is possible that over time England could negotiate preferential trade deals with other key countries.

“If favourable trade deals are achieved with other countries by England then you may see Scottish firms moving to England. There will also likely be firms with multiple locations to benefit from each country’s arrangements.”

A desirable location

Gordon Povey, CEO of Edinburgh-based startup Trisent, believes the referendum could ultimately could result in Scottish cities overtaking London as startup hotspots. This is because upon exiting the EU, the UK will lose numerous benefits currently enjoyed by the homegrown tech community.

“First of all there is grant funding for companies directly (and indirectly) through the EU; secondly there are also large collaborative projects which often involve academics, SMEs and large companies across the EU; and then there is access to EU talent. The current free tuition at Scottish universities attracts good EU students who go on to postgraduate degrees and often become part of startups,” Povey said.

“Scotland is already a good place for startups and so if England’s startup scene and universities are weakened by leaving the EU this will actually be to the benefit of Scotland (if we were still in the EU) since we would become the preferred environment for startups,” Povey clarified.

Opportunities and risks

Alex Ford, COO of Encompass Corporation, agrees with Povey that Scotland has a thriving tech scene and this will not change regardless of the results of any potential referendum.

Although he said it’s worth noting that some companies would be impacted. “For specific businesses, it really will depend on their core target clients, and whether their product is aimed at a European customer base or that of England, Wales and Northern Ireland, or indeed other countries internationally. In short, some will see it as an opportunity, others a risk, so I would not expect to see huge movement [of businesses] either in or out.”

At the moment a second referendum is not on the cards, but Sturgeon is rallying for support. The government doesn’t seem keen though, with a 10 Downing Street spokesman recently stating: ‘Another referendum would be divisive and cause huge economic uncertainty at the worst possible time.’

At the time of press a petition calling for the second Scottish independence referendum to be blocked had been signed by more than 150,000 people.

However, the UK government has not outright ruled it out as a possibility. In the meantime, for startups on both sides of the border, it’s business as usual.