Brexit-induced immigration law shake-up ‘could spur tech startup growth’

The UK’s impending departure from the European Union (EU) could induce an overhaul of immigration law that paves the way for more tech talent to enter the country, the House of Lords EU internal market sub-committee has heard.

During a meeting on 21 June to discuss how Brexit could affect the startup and scale-up business community, it was suggested that the process could lead to simplification of the UK’s immigration system, bringing huge benefits.

Dom Hallas, executive director of startup lobbyist Coadec, told the committee that Brexit could trigger an overhaul of the government’s Tier 1 and Tier 2 visa criteria.

Hallas said the current Tier 2 visa is “unviable” for the majority of startups, because they cannot afford lawyers to help them go through the various forms. Also, the visa requires experienced foreign workers to be earning at least £30,000 a year, which can be problematic for smaller companies.

“There is a genuine opportunity to rethink the system from the ground up,” he said. “The Tier 2 system, for example – we have specific concerns related to startups because it’s based on salaries.

“In the case of startups, a preferable system would be to encourage equity involvement in the businesses, which doesn’t count towards salary.

“The Tier 1 system, where we have ‘exceptional talent’ visas, in certain cases we see this discouraging women, who are less likely to see themselves as ‘exceptional’, from applying.”

Hallas said a “rejigged” system could be possible post-Brexit, but this could also change the speed at which new employees can be hired.

“At the moment, a startup can sign someone up from Berlin on a Friday and they can be working at their desk on a Monday,” he said. “In a system that is more complicated than that, how do we make sure that our startups are able to access talent as quickly as they are able to now?

“There was a study in April that suggested there will be 800,000 tech jobs unfilled in the UK by 2020. That’s the scale of the skills gap and an immigration system with under six figures of migrants isn’t going to cut it.”

Irene Graham, CEO of the Scaleup Institute, which supports the growth of scaleups, said recent government announcements about startup visas and the removal of the visa cap for NHS doctors and nurses are positive steps.

But more must be done to support the scaleup community too, and “fast-track their needs for skilled workers”, said Graham.

Hallas said the government should be doing more to address the skills gap outside of London by learning how to attract talent to different cities.

“There are some important things the government can do on the digital skills side – ramping up and identifying the areas where there are clear skills gaps in different parts of the country,” he said.

“Also, looking at what hubs there are and what technologies are being worked on there, and effectively funding the ways we can get skilled workers there.”

Hallas said that while uncertainty remains over Brexit, it will be difficult for startups to get investment from the European Investment Fund (EIF).

The European Investment Bank (EIB) established the EIF in 1994 to offer loans for smaller businesses. A total of €3.2bn (£2.8bn) was invested by the fund in 2016, but funding froze last year. Startups such as car insurance firm Honcho have been affected and have had to rely on crowdfunding to raise money.

In a previous House of Lords EU internal market sub-committee meeting on 9 February, Tech London Advocates founder Russ Shaw said that although there had been no public statement about the EIF, it had “effectively stopped investing in the UK” and there was more reliance on the British Business Bank.

Coadec’s Hallas said the lack of clarity from the EIB will continue because of the distant relationship between the UK government and the bank.

“We have wanted to go and engage with the European Investment Bank about this decision, but they have been unwilling to do so because the UK government doesn’t have a position in relation to the bank,” he said. “So, understandably, the EIB is not willing to have a discussion with us as a third party.

“It cuts to a broader conversation, which is that there is a lot of uncertainty in these discussions as we move towards Brexit. With the uncertainty we have, people who want to go and have that discussion and be supportive of the UK government’s position, it’s harder for us to do so.”