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By | SA Mathieson 11th March 2016 09:38

Tech biz bosses tell El Reg a Brexit will lead to a UK Techxit

If we vote to leave the EU we'll all become poor and unemployed, allegedly

Analysis Immigration is one of the main concerns for advocates of Brexit. Some IT firms from Britain and abroad who we spoke to share this concern – but in the other direction.

One UK tech firm has told The Register it could be forced to leave the country if Britain votes to leave the European Union on June 23 – a Techxit, if you will.

Others reckon leaving the common labour market would slow their ability to move rapidly against rivals and to bring on talent in a competitive field.

The reason? The end to freedom of movement that being a member state of the EU has provided.

Currently, any EU citizen can live and work in the UK on the same terms as a Briton with minimal bureaucracy, under the EU’s freedom of movement rules. The same applies to Britons, who can live and work anywhere in the EU. This means British tech employers can draw on a population of 508 million people, rather than 65 million in the UK alone.

Social marketing startup Buyapowa’s chief executive Gideon Lask told The Register that in the event of a vote for Brexit: “I think we’d be forced to go.”

“If I was limited in the people I could bring into the business, yes, we’d have to seriously consider where our home was,” Lask told us.

Founded in 2011, Buyapowa’s customers include Tesco, Costco and Debenhams and the company has raised $7.6m in venture funding. It has offices in London, Paris and New York.

Lask says that more than half of his London-based technology team are from EU countries other than Britain, a group he also relies on to speak eight different languages. “The free movement of people enables that to happen,” he says. “I may lose the core of my team.”

Lask’s scepticism is echoed by the chief executive of Comtek Network Systems, Askar Sheibani.

Sheibani told us it takes a year to bring in a software engineer from India to the firm’s base in north Wales – “the bureaucracy involved is enormous” – but just four weeks to recruit one from Italy. EU freedom of movement also allows the company to move staff between its Welsh offices and those in Germany and Holland to cope with demand: “That makes things much smoother for us.”

Would there be any advantages to tech businesses from leaving the EU? “No,” says Lask. “There will be no benefit at all, zilch benefit, especially in Wales.” adds Comtek's Sheibani. “Politicians are playing on people’s emotions, predominately on immigration.”

Some argue Prime Minister David Cameron has fatally bungled his reform negotiations by focussing too much on welfare payments to those out of work at the expense of bigger issues, such as the Common Agricultural Policy (CAP).

But they don't all want the status quo

Adam Hale, chief executive of cloud HR software business Fairsail, is a reluctant supporter of Brexit.

“If the reforms had been, in my view, meaningful at all then I might well be in favour of staying in. However, I think they’ve been essentially meaningless,” he says of the changes negotiated by David Cameron, adding he is speaking for himself rather than his company.

Hale adds that the prime minister should have focused on cutting big costs such as the Common Agricultural Policy, and making the EU more efficient: “He didn’t ask for nearly enough.”

Yet, with a technology staff from EU nations including France, Poland and Portugal, Hale is enthusiastic about skilled migration to the UK. He says there are far too few home-grown computer experts and he is actually angry that one of Cameron’s reform aims sought to reduce EU immigration by reducing access to benefits.

“If you turn off the taps of migration, you’re killing the tech businesses in the UK,” he says. “The only thing we tried to bloody reform is to cut down the number of migrants – that’s the stupidest thing ever.”

Such firms are not alone in their views. Chris Kennedy, chief financial officer of ARM, whose chip architectures help power millions of Apple phones and tables, is reported to have expressed his concerns about the effect of Brexit could have on his firm’s success. Again, the problem is labour.

"Our main concern is the ability to attract talent and be able to get the necessary papers for them to work in the UK in the event of Brexit," he said recently. “It would slow us down."

A survey of SME lobby group TechUK's members from July 2016 found that 71 per cent want to stay in a reformed EU, with 78 per cent believing exit would leave the UK with less influence on issues concerning their business. The main reforms they hoped for were a more open and competitive single market, including in digital services, and improved processes for reducing regulation.

ICM surveyed a sample of TechUK 202 member companies of various sizes. Seventy one per cent were SME and 29 per cent defined as "large."

Companies inside the EU don't want Britain to leave

But it’s not just native UK firms that are alarmed about the staffing fallout a Brexit might have.

Some foreign-headquartered firms are concerned that Britain being outside the EU may be a less effective base for their EU operations. Mike Rogers is the UK-based commercial director of Danish software firm Formpipe Lasernet. At present, he can easily travel across the EU and is relying on freedom of movement in setting up an EU-wide consulting arm from Britain. “If we leave, it suddenly isn’t business as normal,” he says.

Canadian-based cloud platform firm Cogeco Peer 1 has its European headquarters and data centre in Britain. European general manager Susan Bowen says this relies on multi-lingual staff from across the EU being able to work in the UK: “We need that access to talent, and EU membership gives the UK the potential for more talent,” she says.

Kate Craig-Wood, managing director of UK cloud services firm Memset, has concerns on immigration, with a third of her firm’s tech team from the non-UK EU and rising.

However, she has other issues with Brexit, such as the idea that Britain can focus on export markets outside Europe. “Most of our customers want a latency of sub-100 milliseconds to their services,” she says, which means British hosting facilities are only useful within Europe. “You’ve got the speed of light limit getting in the way, unfortunately.”

She is also concerned that when outside the EU’s single market, Britain would suffer from trade restrictions: “One of the counter-arguments is that both sides would have a strong interest in a free-trade deal, but from what I’ve read, any such deal would be quite unlikely to cover services.”

Trade barriers are no joke, according to Askar Sheiban, who says that Comtek had to give up on selling an item to a Brazilian client after it got stuck in customs for six months. Big companies can build the infrastructure to cope with this, but small firms cannot: “The European Union is a magnificent opportunity for these guys.”

He adds that Britain does well from EU funding for university research which benefits start-ups, and that Wales would lose access to EU regional funds, which the Welsh Government says are worth more than £500m annually.

We'll have nothing but worthless pennies and reams of useless laws

Craig-Wood is cynical that Brexit would reduce regulation, given that Britain is already lightly-regulated and that some of the biggest impositions on employers, she claims, come from Westminster. On personal data protection, where the EU has arguably increased the regulatory burden, she thinks Britain benefits from continental European caution: “Left to our own devices, we would potentially lean towards the American point of view, which I don’t think would necessarily be good for civil liberties.”

Brexit supporters argue that Britain could increase trade with other Commonwealth countries including Canada. Ireland-based Bowen says that Cogeco’s location could help mitigate the impact of Brexit if it happens, but adds that the practicalities of this are yet to be worked out.

Ross Mason, who moved from Britain to California to found integration platform firm MuleSoft - which states on its website that it is a US corporation headquartered in San Francisco - highlights what he sees as the risks of putting Britain outside of the EU’s Single Digital Market work, although this is yet to be completed. He doesn’t buy the argument that a UK outside the EU could emulate countries such as the US, given a much smaller domestic market: “The only way Great Britain can be great in this new digital era is to ensure that British companies can easily deliver digital products and services beyond the physical shores of its island.”

If Britain does leave the EU, some say we should expect big currency movements. “The pound would almost certainly suffer a sharp sell-off in the wake of a vote to leave the EU,” says David Lamb, head of dealing at Irish multinational forex company Fexco Corporate Payments. “In theory, this would be a positive for UK exporters as British goods would become cheaper for overseas customers, but the prospect of additional red tape for firms trading with EU countries would be a concern.”

Memset's Craig-Wood told us: “With both hardware and electricity linked to the value of other currencies their sterling price would rise, cancelling the potential for more competitive export prices.”

Currency movements, it could be argued, would be short-term factors, that could be ridden out and would settle down. Of longer term concern, though, is the loss of potential workers. ®

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