Warnings over Brexit “brain drain”

FinTech in the UK faces a significant skills gap putting the sector at risk of a potential £361 million direct loss, according to new research.

Financial sector working on laptops
Some of the UK’s most innovative companies fear that a Brexit “brain drain” could make it more difficult to recruit and retain overseas talent and hinder their business expansion.Mark Brownridge, director general of the EISA – the foremost trade body for EIS investment into UK SMEs, said entrepreneurs saw Brexit as an opportunity to open up new markets but questions over the Customs Union meant it was still unclear what leaving the EU would mean in practice.

FinTech sector at risk of skills gap

Meanwhile, a new report by WPI Economics and Innovate Finance: Supporting UK FinTech: Accessing a Global Talent Pool, found that EEA migrants were particularly important to the FinTech sector and played an important part of the founding process of many firms.The report, which investigated the growth of the UK FinTech sector and the possible impact of Brexit on the industry, warned that a stringent immigration policy could lead to a skills gap and cause a £361 million direct loss to the UK FinTech Sector.“As well as providing a vital part of the FinTech workforce, migrants play a key role in company formation,” the report said. “Over half of respondents to WPI Economics Survey of FinTech firms suggested that EEA migrants were important because of their involvement in the firms founding process.”

Battle over the future of post-Brexit customs arrangement

The Cabinet has yet to resolve its differences over the customs issue. Today (8 May), Boris Johnson was quoted as saying one of No. 10’s proposals for a post-Brexit customs arrangement as “crazy”. A “customs partnership”, thought to be favoured by Teresa May, would involve the UK collecting import tariffs on behalf of the EU, Mr Johnson told the Daily Mail.

Pragmatism among UK businesses

While politicians try to hammer out a deal, companies in the UK are delaying investments until the picture is clearer, Mr Brownridge said.“SMEs see opportunities in new markets and trade deals outside Europe and the prospect of having stronger trade links with Japan and the US,” he said, “but business owners need clarity as to what is happening and when.”He explained that SMEs in the UK were looking for two things – availability of funding and the right mix of people who were skilled in the development of disciplines such as Artificial Intelligence.“We need migrants from abroad who can fill the skills gap,” he said. “One in seven businesses in the UK are started by migrants and some go on to be hugely successful and an important part of the economy. We need people from the EU, Russian states, Thailand, and the Far East who have the technology skills that FinTech demands. The real issue for some companies is finding the right people at the right price.”UK employees do not necessarily have the right skill sets in AI or coding, and although schools are now teaching coding as part of the curriculum, there were still too few people taking vocational courses at a higher education level, he said. Another issue was the lack of significant funding in the UK for expanding companies.“People are worried about a brain drain, and about the availability of funding. For a lot of smaller companies when you get to a certain point, you need significant funding. There are businesses looking for investments of £250 million who might relocate to China or Silicon Valley.”
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Universities also concerned over Brexit uncertainty

Entrepreneurs are not alone in urging government to be clearer on the Brexit issue. Universities and big business have also warned that the uncertainty around Brexit is having an effect.Last month (April) the Russell Group of universities announced a 9 per cent fall in non-British EU students starting postgraduate research courses in 2017-18, according to The Guardian. Overall 16 per cent of Russell Group PhD students are from the EU, but this rises to 27 per cent for maths, 22 per cent for computer science and 19 per cent for the physical sciences.

Visa rules are also in the spotlight

The City of London Corporation and the Confederation of British Industries have also suggested that entrepreneurs from abroad might avoid the UK following changes to the country’s visa regime. 

“The uncertainty doesn’t help,” says Mr Browridge. “People are waiting to see what happens before making investment and export decisions, but once the decision is made, then they are ready to move.”The EIS Association (EISA) is the official trade body for the Enterprise Investment Scheme. Statistics from the British Business Bank Small Business Finance Monitor 2018 shows that there were 5.7 million private sector businesses at the beginning of 2017 in the UK and the SME sector overall (firms with 0-249 employees) represents 99.9 per cent of all private sector firms in the UK, 60 per cent of employment and, at £1.9 trillion, 51 per cent of gross turnover.The report by WPI Economics suggests that the UK FinTech sector will continue to grow between now and 2030. It will need approximately 33,500 EEA migrants to enter the workforce, particularly those with high skills.“Our surveying and in-depth interviews with UK FinTech firms suggest that they are aware of this fact, and the potential move to a more restrictive immigration system is viewed as detracting from the attractiveness of the UK as a place to do business,” the report says.“It is most likely that the system for EEA migrants will move closer to the existing system for non-EEA migrants to the UK. If this were the case, this could limit the ability of FinTech firms to attract and retain the global talent they need to thrive.”A conservative estimate of the short fall of highly-skilled EEA workers in the FinTech sector is 3 per cent by 2030.“If the sector were to grow faster, or if the immigration system were to become more stringent, then we would see this shortfall accelerate rapidly,” the report said.The UK FinTech sector has 76,500 employees and last year attracted $1.8 billion of venture capital invested across 224 deals.London and the rest of the UK may become a less attractive place to found and grow FinTech companies due to a combination of uncertainty, and lower access to both European markets, and human capital.“Consequences could include companies being founded elsewhere, choosing to expand to different jurisdictions instead of growing their UK presence, or simply delaying investment and growth,” the report says.
This article is taken from a series surrounding Relocate’s Festival of Global Mobility Thinking on 11 May 2018. The highly successful, interactive event included speakers such as Prof Dr Dimitry Kochenov, author of the Henley & Partners Quality of Nationality Index (QNI); and Dr Linda Holbeche, author of The Agile Organization. For more information and to find out how you can get involved in this unique event next year, contact: events@relocatemagazine.com 
For related news and features, visit our Brexit section. Find out more about our Relocate AwardsRelocate’s new Global Mobility Toolkit provides free information, practical advice and support for HR, global mobility managers and global teams operating overseas.Access hundreds of global services and suppliers in our Online DirectoryClick to get to the Relocate Global Online Directory 

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