Despite the ambiguity that has prevailed since the EU referendum, we’ve wrapped up 2019 and entered a new decade with some degree of clarity over Brexit.
The UK tech sector, and in London in particular, may not have welcomed the decision, but can at least move forward and plan with relative certainty. It can also be proud of the resilience it has shown to the volatility of the British economy, becoming the UK’s fastest growing industry in the last three years.
Although we are yet to see the full effects of Brexit, the general election may have been exactly what the UK – and London as its premier tech hub – needed to end a chapter of productivity stagnation, cautious investment and confidence in the nation’s economy.
However, the next phase will not be without its hurdles – even assuming that the UK secures as ‘soft’ a Brexit as possible – and addressing these will be critical if we wish to establish the UK as the ‘third home’ of tech, alongside the US and China.
The 2020 opportunity
Fintech, one of the major strengths of London’s tech scene, was born out of the financial crisis – resilience is in its DNA and Brexit was not going to be the exception. According to Atomico’s most recent report, the industry attracted over £8.6bn in 2019 – double the £5.2bn after the referendum. The industry is the shining star of the British economy – and undoubtedly it will continue to be so.
The outlook also looks positive for investment in UK tech – with record funding from both the US and China last year. The industry has seen a healthy, steady growth despite market volatility. With Brexit progressing, we will likely see these records surpassed. While funding will continue to boost our leading verticals, its increase will also help drive growth in other sub-sectors. We will also see deeptech making headlines – from quantum to AI, the UK will be at the forefront of positive disruptive innovations.
There will also be a number of more niche verticals maturing over the next 12 months. From proptech and retailtech to healthtech, these will be gaining traction based on economic trends. In property, we will see new start-ups addressing the surge in property prices post-Brexit; retailtech will be addressing the consequences of the high-street struggle; and healthtech will see a boost after further funding is injected into the NHS.
Caution in clarity: overcoming tech challenges
Even with relative certainty on the horizon, London’s tech leadership will have to overcome familiar challenges coupled with new ones to cement its global position.
As the UK prepares to leave the EU, immigration will continue to be a challenge. The government must provide fit for purpose visa and immigration policies, to ensure that London and the broader country can feasibly attract exceptional talent from the EU and beyond.
To achieve this, Tech London Advocates has been calling for the government to lift the cap on Tier 2 Visas. We are also calling for the public and the private sector to collaborate to ensure that the “innovator visa” is improved – with efficient processes in place for third-party endorsements.
Secondly, the talent conundrum will roll on throughout this year. While there are several ways of addressing this, and change is happening, the industry must only enhance its efforts to make sure London will fill one million tech jobs by 2023.
For example, there is still much to be done to bring more diversity into the sector. Blind screening will need to be further entrenched in recruitment processes; investors must fund more diverse founders; and more funding needs to be injected into digital skills education, not only to ensure that the next generation is well equipped to face the new digital economy but also to up-skill current talent.
There will also be pressure on regulators to hold Big Tech accountable. More countries like France will be taking unilateral action on digital tax causing further trade tensions and harm to the growth of the industry. We will see a growing burden for the OECD and the G20 to come up with a viable solution if we want to prevent countries from going it alone. But, if we want a comprehensive and fair taxation, we must ensure that the UK leads the conversation towards collaboration – and grasps the opportunity to be the global voice for a progressive and fair tech regulation.
One piece of the puzzle
Despite the longer-term impact of Brexit, 2020 should see a year of continued growth for London’s tech sector and the UK more widely, with the relative certainty it has been craving for so long releasing funds for investment.
This, of course, comes with many of the challenges associated with a fast-growth ecosystem and can be achieved if London works alongside regional tech hubs such as Manchester, Bristol, Belfast, Cambridge and Edinburgh, rather than in isolation – leveraging its global role to boost their profiles too.
This year, our industry will be facing another defining moment for the future of London’s tech with the mayoral election happening in May. The next mayor will have a big task on their hands if the capital is to remain at the forefront of global tech innovation – and addressing these challenges will be paramount to consolidating the city’s position.
Russ Shaw is the founder of Tech London Advocates and Global Tech Advocates