The Newcastle Upon Tyne vote was a turning point in a shocking 24 hours in politics. The northern constituency announced a remain victory around midnight, but the margin was much narrower than expected, the celebrations restrained and the pundits cautious.
When we woke up this morning the narrative had gone against what the bookies, the pollsters and even the leave campaign believed; the UK voted to leave the European Union (EU) by 51.9% to 48.1%, with Scotland and Northern Ireland registered a majority for remain.
What does it mean for the country’s entrepreneurs?
BusinessZone’s snap twitter poll on the sentiment about the result garnered 290-plus votes in its first two hours. The results? A 36% majority thought the impact of the UK leaving the EU was going to be bad, 29% thought it was time to “keep calm and carry on,” 21% said they were leaving the country and just 14% thought it was a big opportunity.
This is perhaps a reflection of our following and Twitter’s wider political bias. Many entrepreneurs are talking positively about the opportunities Brexit has created.
Russell Quirk, CEO of disruptive online estate agency business eMoov, is one of many business founders who believe the UK can thrive outside of the EU.
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“There will be some very short-term uncertainty that will result (as it has) in sterling and share prices dropping,” he told BusinessZone. “This should only be a knee-jerk reaction and these markets will recover. Going forward the UK market will go from strength to strength, perhaps with wobbly knees at it emerges from the clutches of the EU, but it will soon find its feet again.”
The UK market will go from strength to strength, perhaps with wobbly knees at it emerges from the clutches of the EU, but it will soon find its feet.
In light of the potential economic impact, various small business trade groups stressed the need for economic stability. With the Federation of Small Business’ Mike Cherry calling for the government to let firms know what this means for their access to the single market “as soon as possible”.
Impact on investment
The UK’s been lucky enough to create one of the best environments for seed-stage investment in Europe, with industry-leading tax breaks and an incredible startup ecosystem.
The country's burgeoning tech startup scene, which relies heavily on European talent, networks and investment is highly prone to the potential impact and its figureheads appeared deflated.
Hiroki Takeuchi, CEO of payment firm GoCardless, said: "As a tech scale up, we face unpredictable and emerging challenges all the time. We sympathise with the next generation of startups, who may suffer without some of the advantages that got us where we are today.”
“The plain fact is that much of UK company investment and foreign investment is heavily linked to having a guaranteed tariff-free access to the EU market. Raising early stage funding in the lead up to the referendum has been tough as investors have been very cautious due to the uncertainty and this just gets worse.”
“Startups already felt the pressure to take their business to the states and raise money across the pond in order to scale their business. I believe this will now happen earlier and many startups will move out of the UK.”
We sympathise with the next generation of startups, who may suffer without some of the advantages that got us where we are today.
However, Max Chmyshuk, founder of small business lending company Fleximize, countered this point noting that many of today’s growth-stage businesses were launched in the recession and argued that there’s “no reason to believe that this will lead to a decline in the UK’s startup scene”.
Indeed, Luke Lang, co-founder of Crowdcube and an instrumental figure in the UK’s alternative finance market told BusinessZone he does not envisage Brexit having a negative impact on crowdfunding activity, adding “there may be significant opportunity” as the government works to prioritise the industry.
Workers from the European Union
The question of what happens to European Union citizens currently employed by small businesses remains to be answered. It’s widely estimated it will take around two years to negotiate an exit from the EU, buying small businesses time to react to whatever points-based system is put in place.
However, immigration consultancy Migrate UK pointed out that the current system is strongly geared towards skilled immigrants. Jonathan Beech, managing director, added: "All our clients already face big challenges and costs when hiring non-EU workers under UK immigration laws, which makes it hard to find the skills they need."
Andrew Weaver, CEO and co-founder of Lawyerfair, which helps businesses find legal services, raised concerns about the long-term impacts of access to talent.
“There’s probably no immediate issue with growth or recruitment, free movement and trade with the EU will continue as normal in the short term. Longer term I see issues for startups and tech companies in the ease of attracting good quality staff and you might find other tech hubs like Berlin, Stockholm and Barcelona rise in prominence,” he told BusinessZone, adding that he’s personally concerned about the direction the country is taking.
The PM to take his hand off the tiller
In a moving speech, the Prime Minister highlighted the vote as being an impressive democratic act - “it is right to ask the people themselves” - and stressed that there would be no immediate change to the free movement of goods and people.
"I will do everything I can as Prime Minister to steady the ship over the coming weeks and months, but I don't think it would be right for me to try to be the captain that steers our country to its next destination,” he said on the steps of Downing Street, adding he expects to resign by October.
It’s tough that one of the strongest speeches he’s made will be one of his last, his legacy re-written in a single day.
Looking to the future
The UK outside of the EU is going to look very different. More than that, the country needs to come to terms with economic turmoil and a sea change in politics not seen for decades.
It’s not just the referendum vote, but UKIP’s large showing in the general election, the narrow margin on the Scottish referendum and Jeremy Corbyn surprise accession to the head of the Labour party; it’s clear Westminster is out of step with the public and the country is starting to plot a course toward a very different future.
Indeed, the possibility of another Scottish referendum on leaving the UK, and a re-shaped partnership between Ireland and Northern Ireland have already been raised.
This morning’s vote is a fresh start for business. We have asked for the opportunity and now we should take it.
No doubt the UK’s growth-stage businesses will adapt and find a way to continue to thrive. At a breakfast meeting hosted by the High Growth Knowledge Company in Bristol on a sunny morning earlier in the week, a founder noted that whatever the outcome of the vote “the UK will prevail, we weather the storm and muddle along a bit like Dad’s Army”.
BusinessZone columnist, ex-government entrepreneurship advisor and founding chairman of the LNT Group Lawrence Tomlinson saw immediate opportunity in this new dawn.
“This morning’s vote is a fresh start for business. We have asked for the opportunity and now we should take it. The pound is down against the dollar and therefore related currencies. We should be speaking to Asian markets to let them know they can have a better deal on our products. As soon as the US wakes up, we should be on the phone saying our products are now much better value.
“The markets may be volatile this morning, but once the city opportunists have taken their profits on their gambles and their clients their losses, it will soon rebound as the real economy pushes forward.”
What do you think will happen next? Leave a comment below and join the discussion.
About Christopher Goodfellow
Journalist and editor with nine years' experience covering small businesses and entrepreneurship (ChrisGoodfellow.net). Follow his personal twitter account @CPGoodfellow and his events business @Box2Media. He has written for a wide range of publications in the UK, Ireland and Canada, including The Financial Times, The Guardian, The Independent and Vice magazine.