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British tech turns to Silicon Valley to ward off Brexit blues | Business

Theresa May’s article 50 letter might have dominated the front pages in Britain but it was met with a shrug in San Francisco, where 30 tech leaders from the north of England recently embarked on a four-day mission to woo, impress and tempt cash from Silicon Valley’s top dealmakers.

Anxiety over the future of Britain outside Europe has not, it seems, spread to the home of Facebook, Twitter and Google.

“Investors here just don’t know what Brexit means yet,” said Gerald Brady, managing director of the multibillion-dollar lender Silicon Valley Bank.

However, that is not stopping EU27 countries from making furtive attempts to lure British entrepreneurs overseas.

“Other European countries are trying to attract talent by saying, ‘Hey, come to Ireland, or Holland or Germany because we’ve got free movement of people and if your number one issue is talent, we’re gonna be able to help you get engineers.’ That’s happening today,” Brady said.

Matt Haworth, the co-founder of Manchester-based “tech for good” agency Reason Digital, said he and other entrepreneurs had been targeted with Facebook adverts from authorities in Estonia and Transylvania since Britain voted to leave the European Union.

But it will take more than that to lure Haworth and others away from northern England, where a rapidly growing technology sector has led to a boom in investment in Britain’s former industrial heartlands.

Investment in northern tech businesses reached a 10-year high last year at £327m, up from £20m in 2007, according to the government agency Tech North, as startup clusters developed in Manchester, Leeds, Sheffield and the north-east. Sunderland, which is about as far removed as you can get from Silicon Valley, has the fastest-growing digital turnover in the UK behind London, according to Tech City UK.



Manchester airport now offers direct flights to San Francisco. Photograph: Martin Rickett/PA

GP Bullhound, an investment bank, says the north now has 12 tech “unicorns” – that is, companies valued at more than $1bn – which is more than Sweden or Germany. They include some of the UK’s biggest tech businesses, such as the software giant Sage and The Hut, the online retailer with an annual turnover of £335m.

Northern tech businesses received a further boost recently when Virgin Atlantic launched its inaugural flight from Manchester to San Francisco, the first direct UK route outside London. Entrepreneurs hope it will tempt US investors to look outside the capital, where tech companies received £1.4bn of the £1.9bn invested in the industry last year, according to the mayor of London’s promotional firm London & Partners.

The northern tech scene might not be under threat from Brexit, but there remains significant barriers to competing with London. Founders complain that UK investors are far more risk-averse than their US counterparts, stifling the growth of young companies. Scott Fletcher, the founder of IT firm ANS, believes Manchester’s wealth of former Premier League footballers, such as Gary Neville, should open their chequebooks to the region’s top tech-talent.

“Gary Neville is a one in a million in that he’s an entrepreneur as well, but when you approach other footballers all they’ve known all their life is football,” said Fletcher. “They always have advisers and agents around them who have got a vested interest so trying to get access to them is quite difficult, and they’ll generally go for safer investments. You’ve got to be willing, when you invest in tech startups, to lose all your money.”

Jamil Khalil, the founder of Manchester-based social curation platform Wakelet, said “so-called early-stage investors” in Britain made him feel like quitting many times when he was knocked back because the business was not yet making a profit. Luke Massie, the 23-year-old founder of secondary ticket marketplace Vibe Tickets, said Silicon Valley benefited from an “ecosystem that props up startups”, unlike the UK.

“Investors over here [in San Francisco] are backing growth, whereas in the UK they’re focused on profitability, which means over here a company like mine can focus on your main challenge – spending £1 and making two from it,” he said.

Andy McLoughlin, a British-born San Francisco-based investor, said Silicon Valley’s view of the UK was still heavily London-centric. “Getting more British startups to the west coast – where they can taste the pace of innovation and scale of thinking – can only be a good thing,” he said.

“But a single new flight route won’t put the north of England on top-tier Silicon Valley venture capitalists’ radars. It’ll take a sustained ecosystem producing numerous great companies – something that London has only really started to do in the last five to 10 years.”

Tallinn. The Estonian authorities have been trying to woo Uk tech firms worried about the end of free movement after Brexit.



Tallinn. The Estonian authorities have been trying to woo Uk tech firms worried about the end of free movement after Brexit. Photograph: Sean Gallup/Getty Images

A more significant challenge to the northern powerhouse lies in the ageing road and rail network, which business leaders say is causing Britain to lose out on potentially billions of pounds in growth and thousands of jobs. The trade minister, Greg Hands, was lobbied privately recently by entrepreneurs to sort out the north’s woeful transport infrastructure at a networking event to mark the launch of the Virgin Atlantic flight.

Phase two of the long-delayed HS2 rail network, from the West Midlands to Leeds and Manchester, is scheduled to begin operating in 2033 but businesses have demanded urgent investment to slash travel times between the north’s major cities.

Charlie Cornish, the chief executive of Manchester Airports Group, said growth in the north would continue to be held back without government action.

“It’s a massive part of the UK economy, and for Manchester airport to continue to grow and prosper and create more jobs, it will help to narrow that north-south divide. But unless you’ve got connectivity across the north, it’s very difficult to see how you can narrow that north-south divide.,” he said.

Speaking at Manchester airport, Hands said increasing connectivity in the north was a government priority.

“We’ve got a big infrastructure programme over the course of this parliament,” he said. “HS2 is obviously right at the centre of that but we’re also looking at smaller large schemes to increase and improve connectivity within the north. One of the things I hear businesses right the way across the north say is that one of the most important issues for them is connectivity to Manchester airport.”


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