25th June 2016 | By: Jason Vincent
#Brexit – Innovation Funding, Manufacturing and a Lack of Talent
As much as I dislike the recently coined #brexit, it’s now clearly the topic of conversation in every tube, bus and cafe around London. But whilst we had endless scaremongering from both sides of the campaign *before* the referendum, we’re now faced with a deluge of further fear-inducing “facts”, resulting in the so called #bregret. Personally, I feel that a ‘democratic’ vote on the back of blatant lies, some of which barely survived until the morning after the referendum (such as Leave’s £350m contribution to the NHS that was a ‘mistake’ but a significant number that inspired confidence in voters), isn’t particularly democratic at all… Not to mention excluding all existing EU citizens from voting, despite their contribution to the UK economy over the past 40 years! But that’s another story altogether.
As a non-UK, EU citizen who has lived here for as long as I can remember, I have a strong opinion on the subject. Strong enough to write a politically-oriented post for the first time, with the aim to bring forward a few key – practical – points about how I personally feel that this will affect some of us in the Technology and Innovation sectors. Needless to say, this is entirely my opinion. I also personally suspect we may never end up invoking article 50 as it would be political suicide for anyone in power, unless the likes of Farage made it to office, in which case we’d likely have bigger, more pressing topics to worry about.
With the end of the Growth Accelerator program last year (which was itself a controversial and in my opinion ridiculous move), we saw a small reduction in the governments investment in startups and SME’s. But even this tiny change was felt by my business and many others around the country. It was a good (albeit flawed) program, with decent principles – help small businesses understand where they need to improve, and then help them do it. Speaking from personal experience, I can’t emphasise the extent to which such a scheme can be effective. They say the first step to solving any problem is recognising it. Particularly as an SME where your todo list regularly extends beyond anything reasonably manageable, it can be invaluable to have some external perspective and take a birds-eye view approach to where the business is going.
Now however, we’re potentially cutting ourselves off from the EU’s funding programs in general. Whilst some will argue that “we don’t know that”, I feel that just being in a limbo state of uncertainty when it comes to funding can do as much (if not more) damage to a business. The UK has spent significant resources pushing national Innovation and Manufacturing forward, and the outcome of last weeks referendum could quickly erode any positive gains in those areas. With so many competing organisations, charities, public services and even government bodies looking to make up their funding short-fall as a result of restricted EU grants, it begs the question how much will be left to invest in the areas that will guarantee our future tomorrow, next month and next year.
I found it shocking in the weeks leading up to the referendum how few mentions there were in the media about the extent of funding – primarily in the form of grants and subsidies – that originate from the EU. Surely this should have been the first counter argument to the claims of ‘extortionate’ contributions we make as an EU member in the first place!
There’s a great article that pre-dates the referendum published by MSC R&D (which can be read here) mentions “The UK has historically done pretty well in terms of its share of EU research and innovation funding, being second only to Germany in the last EU Framework Programme (FP7) by receiving €6.8bn in funding compared to Germany’s €7bn. The UK, which accounts for 12% of the total EU population, received 16% of the FP7 funding”. That’s a significant number, by any measure. Of course, most voters have been drawn in by sensationalist campaigning focused on immigration and our outgoing contribution to the EU, completely bypassing the countless benefits we have been receiving.
Over the past 18 months, I’ve met with and been introduced to several businesses at the forefront of innovation that have directly received grant funding from the EU, and in some cases even relocated to the UK in order to benefit from these forward-thinking schemes. Will they remain in London or the UK now? I know I wouldn’t… The world has moved on in the past 50 years, with exponential advances in technology and I’m confident that increasing our isolation (let’s not call it sovereignty!) will not bring a competitive advantage.
If we consider the manufacturing sector (which Aeguana is also heavily involved in), we see an even starker picture. It’s a cut-throat industry, driven by tight margins where investment in the latest technology is essential to remain globally competitive. The UK is currently the 11th largest manufacturing industry in the world, and makes up 54% of exports .
However, as a country we’ve now destroyed our purchasing power for raw materials. We’re looking at increased bureaucracy and most likely cost when it comes to exports. We’re faced with different conformity requirements for products (so long CE Marking) which need to be adhered to by OEM’s. And the list goes on. Just when we thought we were recovering from the shift to outsourced manufacturing abroad by leveraging technology, quality and general efficiency, we now risk destroying decades worth of work in minutes.
From the moment the UK invokes article 50, we’re likely looking at a further collapse of the Pound (although arguably the Euro won’t be far behind). We’re looking at a deterioration of confidence in the UK’s financial institutions. EU migration will shift dramatically as few will want to make life-changing career moves with the uncertainty of whether they’ll be allowed to stay, or whether their families will be allowed to move etc.
And what about other pioneering sectors? Could London continue their push to be the global FinTech capital given the impending crisis? In a country where access to specialised labour in the fields of technology is already a major challenge, why would companies possibly continue to establish themselves here when they have less incentives to do so every day?