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While tech giants hire, startups fret — Has Brexit Britain become La La Land?

If you’ve read the latest headlines about Britain’s tech industry, you’d think the country hadn’t been rocked by the greatest political and economic uncertainty since the Second World War. Not only are UK startups raising record amounts of funding year on year, but tech giants like Amazon are investing and doubling down on the UK economy, as if the mood music was taken straight from a dance scene in La La Land. Surely Brexit Britain is booming?
This week Amazon said it would hire 5,000 people across the UK this year, boosting its headcount by a quarter when it moves into new offices in London’s Shoreditch. At least 500 of those new jobs will be in Amazon’s new research and development centres in Edinburgh, Cambridge and London, which has a hand in developing technology for Alexa, drones and Prime Video.
It was hailed as clear sign of the ecommerce giant’s long-term commitment to Britain. But of course 4,500 of these jobs will be in its packing warehouses across the UK. That said, Amazon did add 3,500 new jobs in the UK in 2016 and opened its first UK AWS data centres in London.
Doug Gurr, Amazon’s UK country manager made it all sound pretty sexy, emphasising “all types of roles from flight-test engineers, software engineers and corporate managers” while fleetingly mentioning the “fulfilment roles in our fulfilment centres” when speaking to the FT.
The move followed promises by other tech giants to double-down on the UK, seemingly undeterred by the uncertainty around Brexit.
In November last year Google said it would hire an additional 3,000 people in its London office over the next few years. Soon after, Facebook said it would hire an extra 500 employees in the UK in 2017, boosting its British headcount by 50 per cent.
Apple also announced last year that it will establish a new UK headquarters at the re-vamped Battersea Power Station, taking an enormous 500,000 square feet.
So, given all this apparently good news why is it that survey after survey reveals an underlying sense of dread and fear from the UK startup community about the future?
Again this week, new surveys out of the UK  startup community found huge underlying concerns.
The Coalition for a Digital Economy (Coadec), a policy group representing tech and digital startups, released two reports in quick succession.
The first highlighted a critical fall-off in the STEM skills held by the UK’s population due to a lack of government funding. The second sounded alarm bells over visa restrictions leading to a tightening of the numbers of high-skilled specialists from overseas.
Right now the tech sector accounts for 16 percent of U.K. domestic output and 3 million workers, or 10 percent of all jobs in the U.K. By contrast, manufacturing accounts for 10 percent and construction accounts for 6 percent. As you can probably gather, most people work in the service economy.
Coadec said the UK is going to need an extra two million digitally skilled workers by 2020 to satisfy its growing tech economy. Software developers are the most sought-after, accounting for 27 percent of vacancies. But at the moment the UK is the bottom division internationally when it comes to the proportion of teenagers studying math to a high level.
Separately, Coadec warned that restrictions on the availability of high-skilled specialists from overseas risks choking off a major growth sector of the U.K. economy. It’s calling for a special visa to allow qualified people to enter the U.K. and seek work in the digital economy, given that a third of the average tech company’s workforce is from outside the UK. It estimates there is already a talent shortage of 800,000 workers. In a year or so’s time that figure will probably hit a million.
But is it easy to hire tech workers from overseas in the UK? Almost 70 percent of respondents to the Codec survey said bureaucracy and time is already a major barrier, and many said they were put off by the red tape and around £6,000 in legal fees to make a single hire. Of course, we can expect that to get so much easier and cheaper after the UK leaves the EU…
So where are these millions of tech people going to come from? Space?
While the media and politicians trumpet a few thousands “tech jobs” created in Amazon’s packaging centres, it turns out that the UK tech industry — and especially startups — is facing a huge shortfall in the number of people it requires to feed its economy, and with continuing uncertainty over the status of EU workers in the UK due to Brexit.
Unsurprisingly, the Brexit propaganda doesn’t tell the whole story.
For Amazon is creating jobs all over Europe, not just the UK.
The pomp about Britain being “Open for Business” as the Prime Minister likes to trumpet, wears thinner when you realise the moves by Amazon are simply part of a wider European expansion. In fact Amazon is so confident in the EU that it’s hiring 15,000 people across the continent.
What are we to make of this huge divergence in views? On the one hand the tech giants seem to be doubling down. But at the startup end of the spectrum, where the pockets are not nearly so deep, they are enormously concerned about were they are going to get their future talent.
It’s probably time then, as our US cousins like to say, to wake up and smell the coffee.
Let’s start with the big dividends for large companies around property.
Commercial property, where all these Google, Apple and Facebook employees are going to be housed, is in a state of post-Brexit confusion.
A quarter of the value of commercial property deals that were in the market on June 23, the day of the EU referendum, fell through. Any savvy person at one of the above tech companies would immediately have sealed a sweet deal on their new office at that point.
And around £3.5bn worth of commercial property transactions have failed since the UK voted to leave the European Union. Although values have held up, all this uncertainty will have likely allowed the tech giants to play hard ball with property developers.
And Apple’s 1,400 employees are simply being merged from eight offices around the capital into one. That’s quite a saving.
Let’s also remind ourselves that while Amazon is moving into the famous Shoreditch area, where London’s tech startup boom originated 10 years ago, it’s now a place were most early startups must huddle together in packed co-working spaces, often unable to afford office spaces of their own.
Then there’s the currency. With the Pound crashing to the floor in recent months, it’s become cheaper than ever before to hire in the UK, which remains the simplest and easiest place in Europe to both hire and, crucially, fire, when needs be. The salary bills in the UK are currently making Financial Controllers weep with joy.
And if you are selling “things”, as Amazon and  Apple are, your profits are just fine, as retailers look to squeeze more out of a British public who must buy their good in their diminishing pounds, even as costs go up.
Is seems like Brexit Britain might well be a ‘Shangri-La’ for a certain type of ‘tech industry’ which has deep pockets, access to international currency reserves and plenty of property lawyers. But where the future of its innovation sector, its startups and entrepreneurs is concerned, it’s not looking at Shangri-La so much as La La Land, singing a much sadder tune.

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