General election 2017: The UK tech sector reacts
Theresa May hedged her bets and she lost.
Although the UK Conservative party has gained the most votes, May has failed to gain the overall majority she longed for, meaning the country is now looking at a hung parliament for the second time in seven years.
At press time, May had already struck a deal with the Democratic Unionist Party (DUP) and is expected to ask the Queen for permission to form a minority government later on today, despite the Labour party leader Jeremy Corbyn’s calls for her resignation.
The past 12 months have proved challenging for UK tech firms, as many were left reeling following the country’s controversial Brexit referendum and all the uncertainty that followed, but it seems there’s more to follow.
“Although there’s an inevitable sense of uncertainty following the confirmation of a hung parliament, I hope for the speedy formation of new government,” said Tim Mills, investment director at the Angel CoFund.
Although Mills acknowledged there would be an added layer of uncertainty across the industry, he said the snap election results should not impact on the continued success of British businesses.
“In the investment community where we are trying to build the future economy, we must continue to back bold high-growth investments that will help cement the UK’s position as a powerhouse of technology and innovation,” the investor said.
Stuart Veale, managing partner at Beringea, agreed with Mills and called for the next government to be formed as a matter of urgency.
“The continued success and growth of British businesses depends on the new government’s ability to mitigate any market worries. While it was reassuring to see the manifesto commitments to innovation and continued support for investment startups and scaleups, the industry is looking for more clarity around the specifics of these plans.
“The UK economy and the international investment community need reassurance that the government is committed to allowing high-growth businesses to flourish here,” said Veale.
Questions around Brexit
The election results have undoubtedly knocked May’s credibility, not just within the public arena, but also within her party and in so doing have raised some significant questions over Brexit – the reason why she called the snap election in the first place.
With this election, May sought to gain a strong majority to help make her party’s Brexit negotiations with Brussels stronger. Now with a hung parliament on the cards, the Tories will increasingly rely on external support, which could end up proving beneficial for anti-Brexit parties.
“Around negotiations with the EU, it is vital that the government sets out its position as quickly as possible – any prolonged period without clarity in a Brexit strategy could have a major impact on operations and future prosperity,” Veale said.
The UK tech industry has long spoken about the importance of having direct access to the European single market, talent and guaranteeing the rights for European citizens to remain in the UK – three elements intrinsically tied to the industry’s long-term success.
Veale said he would like to see the industry take a proactive approach and navigate the incoming challenges as a united front.
Rachel Carrell, CEO of Koru Kids, a childcare tech firm which recently raised £600,000 for its nanny sharing platform, seemed less concerned about short-term uncertainty but said she continues to worry about the long-term effects of a future outside the EU.
“For the UK tech sector, Brexit remains the biggest risk, and the harder the Brexit, the worse the outcome particularly in terms of access to tech talent and ability to trade with Europe. While the exact outcome of the election is not yet clear, what is clear is that a hard Brexit is less likely today than a week ago. The hard Tory Brexiteers did not get the mandate they were looking for. That’s a positive,” the CEO said.
In contrast, the entrepreneur spoke about the need to move forward with negotiations in order to abate the ongoing apprehension.
“The clock is ticking on Brexit negotiations, we’ve now used up 1/12th of the available time, with zero progress so far and a lot of distraction in the short-term future. The UK tech sector needs a well-negotiated Brexit deal in order to safeguard our access to talent and trade.
“Anything that impedes the negotiations on the UK side is bad for the sector. I’m really worried about the time just slipping away and the UK getting a poor deal as a result of political dithering. If Theresa May were a project manager she’d be fired,” concluded Carrell.
Paying the price
Russ Shaw, founder of Tech London Advocates and Global Tech Advocates, criticised the current landscape and spoke about the need for greater stability.
“Fast-growth tech companies desperately need a political and economic landscape that allows them to attract investment and talent. Tech entrepreneurs will be dismayed by an election result that only delivers further market uncertainty and doubt.”
Similarly to his counterparts, Shaw said the UK needs a government which would seek to give technology companies the conditions they need to grow.
“Our message to government remains the same. Give tech companies access to world-class talent, maintain close relationships with international partners and facilitate the conditions for growth. Debating a minority government does not achieve that,” he concluded.
Ubamarket CEO Will Broome commented on the political situation and called for action within government.
“If Britain is to remain a global leader within the tech sector in the long term, a cross-party consensus must emerge from the next parliament – in whatever form it takes – around targeted initiatives to support innovation, investment and revenue growth based upon the individual needs of tech entrepreneurs,” he said.
Despite London being lauded as the FinTech capital of the world, Neils Turfboer, managing director UK and Benelux at financial technology firm Spotcap, spoke about the need to safeguard hubs outside the capital city.
“Although the majority of UK FinTech companies are based in London, cities such as Manchester, Bristol as well as Edinburgh and Glasgow are thriving alternative hubs and their future success largely depends on the continued efforts of the government to further regional development, expand infrastructures and nurture local talent.”
Peter Tuvey, co-founder and managing partner of Fleximize, an alternative business lender, criticised May and said she had “paid a huge price for putting her own political interests ahead of the needs of the economy and the British public”.
But it’s not all doom and gloom. Kim Nilsson, co-founder of data science hub Pivigo, said she hoped the new government would act in the best interests of the UK economy and industry.
Additionally, Nilsson took the chance to share her concerns about some of the Tories’ proposals.
“I was concerned by what I considered to be a highly damaging policy in the Conservative manifesto to double the existing immigration skills charge to £2K for every non-EU worker hired.
“I hope this result means that this hard line will be abandoned, as this policy would have undoubtedly flown in the face of encouraging diversity in the workplace, and the important task of bringing vital talent into UK companies,” she added.
For the most part, Gerard Grech, Tech City UK CEO, seemed to remain positive too. While he acknowledged that the general election result had added to mounting uncertainty, he said perceived it as a crucial period of transition and an opportunity, which if embraced correctly, would see the technology sector continue to propser.
“We must remember that the tech sector is in a strong position with record levels of investment from overseas, significant new fundraisings from venture capital investors and huge interest in tech from the corporate sector,” Grech added.
Unsurprisingly, UK tech entrepreneurs eyed the pound closely as it dipped to its lowest point against the euro in the past seven months.
Emily Mackay, CEO of FinTech firm Crowdsurfer, highlighted how important startup issues such as the automation of tax systems and improved access to finance would now take a back seat, and touched on the pound’s fluctuations in value and its potential impact on the country’s SMEs:
“The markets have already reacted decisively, with pound to euro exchange rates plummeting, and given that the whole purpose of the election was to give the PM a stronger mandate for Brexit negotiations, it is hard to see much benefit at all for startups, entrepreneurs or the country as a whole.”
Although the pound ‘s declining value is making headlines today, it’s not the first time it has fallen somewhat radically in recent times. Sterling dropped 6% against the US dollar in just two minutes in October last year, sinking to its lowest point since May 1985. Although there was no real consensus as to what may have caused this conspicuous decline, it did coincide with May’s Brexit timetable announcement.
Chris McCullough, CEO and co-founder at RotaGeek, also commented on sterling’s devaluation. “The value of the pound has fallen sharply and trading will be volatile in the immediate term. This won’t help startups with exposure to foreign markets.
“Seen from a very Darwinian point of view, great things happen in difficult environments. As with Brexit, instability and uncertainty are the basis of change. Startups and scaleups are built with an inherent agility and are best placed to leverage this opportunity for good.”
Technology firms have a strong reputation for flourishing in times of adversity and whatever happens in the next couple of days is unlikely to deter entrepreneurs from the mission they once set out to fulfil. The question that remains now, however, is whether politicians, regardless of their affiliation, can get their arses in gear and deliver on their promises.