Knowledge & News

Britain is Still Tech Start-Up Heaven – Despite Brexit

2 April 2019

Accountancy firm RSM reported that the number of new tech start-ups in the UK grew 14 per cent last year.
 
Under the umbrella of this national trend, the figure was 2% in the South East, 5% in the East of England and 48% in Manchester. We are used to seeing the East of England do well but what has caused the spike in Manchester?
 
RSM believe that investors have been attracted to the region by the growing technology community and high quality investment opportunities. Equally, the South East and East of England have been at the top of their game for some time so perhaps have less scope to improve.
 
A population explosion of start-ups doesn’t mean much long term unless they end up succeeding and are still in existence in five years’ time. 
 
Whilst these statistics shine a positive light in spite of Brexit, they don’t paint the complete picture. A start up friendly environment is not much use without quality control. We need to be wary of tech companies which languish in science parks without ever really getting off the ground. There is a thin dividing line between incubator and life support machine.
 
However, these figures do suggest that the UK is getting something right. Admittedly, tax incentives such as the Enterprise Investment Scheme, R&D tax credits, video games tax relief and the Patent Box regime all help but it must be something more than that. A favourable tax system will only keep companies going for so long. Without the right people, technology and market, the companies will eventually flounder.
 
The most likely reason for the UK’s continuing success as an innovation powerhouse is the existence of thriving technology clusters, a model begun in Cambridge and now thriving across the country.
 
Top quality universities attract researchers of an equal calibre. Start-ups are born and can rely on a support network of mentors and investors who have done it all before, as well as on technology-orientated professional advisors such as lawyers, patent attorneys, accountants and insurance brokers who are used to dealing with young companies developing new technologies and operating in (often) high risk sectors. Networking organisations spring up (the more industry-specific the better) and, with their events, job vacancy pages and online presence, ensure that all stakeholders are in the loop. The cluster grows in reputation and, as well as engendering new companies, attracts new ones to the area (including big multinationals such as Microsoft and Apple in Cambridge), making the phenomenon spiral further.
 
Despite concerns about another looming recession and uncertainty as to when, how – and even whether – Brexit will take place, the increase in the number of start-ups across the UK is encouraging.

Authors

Simon Portman

Simon Portman Managing Associate Cambridge (UK) Solicitor (UK)

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