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U.K. tech startups are facing fresh questions about the impact of Brexit now that the Conservative Party has lost its parliamentary majority.
The new political dynamic clouds upcoming Brexit talks between the U.K. and the European Union on issues such as continued access to high-skilled foreign talent and European markets, both top tech industry concerns. Tech companies, including financial technology ones, have struggled with an uncertain business climate since the U.K. voted to leave the EU last year.
“Tech entrepreneurs will be dismayed by an election result that only delivers further market uncertainty and doubt,” Russ Shaw, founder of Tech London Advocates, a group of tech entrepreneurs and others, told Bloomberg BNA.
The digital economy accounts for 16 percent of U.K. domestic output and is comprised of 3 million workers, according to techUK, a group that represents more than 950 companies and startups, including Amazon Web Services UK and Oracle Corp. UK.
Tech companies have lobbied the government to prioritize their needs in upcoming Brexit and trade negotiations, but the new election results leave them uncertain about whether their voices will be heard.
Formal negotiation talks were slated to begin later this month. Prime Minister Theresa May’s loss of influence and the shift in parliamentary power may jeopardize her original plan for what’s been termed a “hard Brexit.” Under that approach, the U.K. was expected to crack down on immigration and restrict access to the EU’s single market for goods and services. The free movement of migrants across EU borders is one of the bloc’s cornerstone principles.
A top concern is the tech sector’s ability to access foreign talent amid what it says is a shortage of engineers and high-skilled workers. A February survey of British tech startup executives said the biggest policy issue they faced was access to talent, according to a report from a London arm of U.S.-based Silicon Valley Bank. Of the digital industry’s 3 million workers, one in five are foreign-born and a third of those are from EU countries, according to techUK data.
“It is vital that the UK remains an open and dynamic economy in which tech businesses of all sizes can be the engine of inclusive growth,” techUK CEO Julian David said in a statement.
The fate of initiatives that allow access to and attract investment in the U.K.'s tech sector after Brexit is also a concern. The UK’s world-leading position in financial technology is far from assured after it leaves the EU, Lawrence Wintermeyer, chief executive officer of the fintech trade group Innovate Finance, has said in a statement.
The UK fintech sector saw an almost 34 percent decline in investment in 2016, Innovate Finance data shows.
“London has worked hard to establish a global reputation as a capital of tech innovation but our endless political turmoil threatens to undermine the best efforts of the private sector by chipping away at the confidence of investors, entrepreneurs and world-class talent,” Shaw said.
TechUK has also touted the importance of a free trade agreement with the EU. The June 8 election results draw into question May’s influence on the U.K.'s access to the EU’s single market. The tech industry is particularly vulnerable to new trade barriers because of its dependence on exporting services to the EU and the EU’s data-sharing regulations.
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