Home Brexit UK start-ups plan for growth despite Brexit uncertainty

UK start-ups plan for growth despite Brexit uncertainty

by LLB Reporter
21st Feb 19 10:08 am

Silicon Valley Bank (SVB), the bank of the world’s most innovative businesses, enterprises and their investors, released the 10th anniversary edition of its start-up outlook report today. The report is based on a survey of 1,400 start-up founders and executives primarily in the UK, the US, China and Canada. Start-up outlook reveals respondents’ thoughts on business conditions, funding, exits, hiring, workforce diversity and public policy issues, including Brexit and business relocation plans.

Erin Platts, head of relationship banking, Europe at SVB said, “As Brexit discussions continue, 75 per cent of UK entrepreneurs surveyed fear that leaving the EU would have a negative effect on the innovation economy in the UK, and their greatest public policy concern is a lack of access to talent,”

“Nevertheless, 81 per cent of UK start-ups are planning to expand their workforces in 2019. The fundraising landscape also looks healthy, as 75 per cent successfully raised capital last year. In addition, 83 per cent say they have no plans to move their headquarters from the UK, underscoring the optimism that still exists despite Brexit related uncertainty.”

UK findings

Following are the key findings from the 2019 UK start-up outlook report. Most start-up outlook 2019 respondents are founders or executives of companies with fewer than 25 employees, and less than $25m in annual revenue. Reports specific to the US, Canada and China are available here.

Brexit

  • 75 per cent of UK entrepreneurs say that in general Brexit, regardless of any specific exit plan, would have a negative effect on the UK innovation economy. Only 11 per cent say that the post-Brexit environment would have a positive impact on the sector.
  • With access to European markets a concern, 28 per cent of UK start-ups plan to open a mainland European outpost.
  • Still, the UK appears to be a vibrant centre of global innovation with more than half (55 per cent) of start-ups saying that they do not plan to move their headquarters outside the UK.

Business conditions

  • 41 per cent of entrepreneurs expect business conditions to improve this year, compared to 49 per cent in 2018.
  • 22 per cent, up from nine per cent last year, of entrepreneurs believe that conditions will worsen in 2019.

Hiring and diversity

  • 81 per cent of UK start-ups say that access to talent is the most important public policy issue they face. International trade (45 per cent) and consumer privacy (42 per cent) rank next.
  • One in three respondents also say that finding talent is extremely challenging.
  • However, 81 per cent of UK start-ups plan to expand their workforces in 2019 – down eight per centage points since 2017.
  • Nearly 50 per cent of start-ups have at least one woman on the board of directors.
  • For the second year in a row, the per centage of start-ups with at least one woman in an executive position is nearly 60 per cent.

Raising capital

  • Three in four UK start-ups surveyed successfully raised capital last year, which underscores the healthy amount of domestic capital available for innovation companies.
  • However, 75 per cent say the current fundraising environment is either somewhat or extremely challenging.
  • Their outlook for raising international capital is also dimming, as 44 per cent believe that access to international capital will be more difficult in 2019.
  • By a large margin, UK start-ups expect their next source of funding to come from venture capital (50 per cent). There is also an increase over 2018 in the per centage of those who expect they will rely on organic growth (rising from four to 13 per cent) or private equity (rising three to 10 per cent) to satisfy funding needs.

Exit strategy

  • As in past years, acquisition remains the most likely long-term exit path (43 per cent), but a growing number of UK start-ups say they expect to stay private – rising from 17 per cent a year ago to 24 per cent. The per centage choosing IPO was steady at 22 per cent.
  • Eight in 10 start-ups think M&A activity will grow or remain about the same in 2019.

Promising technology sectors

  • AI, digital health and big data are the top areas that UK entrepreneurs say have the most promise in 2019.
  • Looking ahead 10 years, they expect autonomous transportation and cleantech/energy innovation to replace big data and fintech in the top five.

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