I suspect that conversations in the bars of Palo Alto seldom turn to speculation on the possible results of the UK’s General Election. After all, it’s a complicated business that on the face of it has little to do with the US’s tech entrepreneurs or investors.
However, there’s one possible result that should make the global tech industry stand up and take notice — a Conservative majority government.
For the uninitiated, the Conservatives are traditionally seen as the business friendly wing of the UK’s political system. So far, so good. However, the current Prime Minister, David Cameron, has promised a referendum on pulling the UK out of the European Union if he is re-elected. Thanks to the UK’s first-past-the-post voting system and the fact that the Conservatives are in a dead heat with Labour in the polls, the chances of an outright Conservative win is slim.
However, May’s results are likely to result in a weak minority government that seldom plays well in the UK. As a result, another election later in the year is a strong possibility and the chances of an outright win for the Conservatives then could be much greater.
So why should the tech community outside the UK care about the election results?
In a nutshell, a Conservative majority government will usher in an EU referendum — and stricter immigration controls with it.
The UK, and specifically London, is the crossroads of the tech world. If you want to launch a company in Europe, you go to London first. Universal use of the English language and a favorable time zone make it the ideal place to do global business. Most European tech companies trial their products and services in the UK before launching into the US. Similarly, most US tech companies use the UK as a testing ground for global expansion.
Consequently, investment and expertise flock to the UK and have made London Europe’s capital of tech. I’m sure many US-based entrepreneurs will be quick to point out that London’s tech industry is far behind New York and San Francisco. However, even if true, it’s missing the point. Britain, with its social and cultural ties with the US and access to the European single market, is the easiest place for US tech entrepreneurs to do business outside the US. A referendum on the EU and tighter immigration controls threaten this advantage.
If the UK leaves the EU, access to the European market becomes much more logistically challenging for global tech entrepreneurs and investors. The benefit of largely homogenized corporate, employment, investment, IP, and financial rules could be thrown out. An end to the free movement of workers will also severely hamper the growth of UK-based tech companies. Subsequent tighter controls on immigration will also make it much more difficult for global tech companies to set up in London.
It’s easy to shrug and say that this is only the UK’s problem. But putting aside the size and value of the UK domestic market, there are also few good alternatives to London as a global launch pad for tech companies.
Dublin benefits from the same time zone and use of the English language but does not currently have the infrastructure, financial services industry, or workforce to fully replace London. Paris and Berlin both suffer from a more restrictive business environment and a more alien corporate culture. It’s not easy for a New Yorker to make sense of Parisian working practices, even if they can speak perfect French.
If you’re not concerned about the results of the General Election yet, I suggest you look at your business strategy and imagine it with the UK crossed out. It suddenly becomes a lot harder to scale and plan global expansion.
Of course, exiting the EU does not mean that the UK ceases to exist as a place to do business. It just becomes a much more complicated place to access with far fewer benefits. The more complicated the market, the longer and more expensive it is to enter. In the tech industry, where rapid growth is crucial, this makes a British exit from the EU a big problem.
With that in mind, I would suggest every tech entrepreneur and investor watches the election on Thursday, May 7 with a keen interest and crosses their fingers the Conservatives don’t win.
Mike Weston is CEO of UK-based data science consultancy Profusion.
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