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London: An expansion option for international businesses after Brexit?

Since the Brexit vote in June 2016, the future of international digital technology businesses in London is unknown, causing concern.

Business Leaders are looking at the various scenarios that Brexit poses and trying to understand the outcome. Questions and concerns that weren’t an issue pre-Brexit, now need to be considered for successful expansion into Europe for international organizations. For example, if you open a business in London, will it simply be a short-term measure? Or will the changes in legislation and international political cooperation impact the ability of a London-based business to operate across EMEA?

At this point, the exact issues and factors that could affect a business’s ability to expand into London are still unclear. Below we highlight both positive and negative potential implications for expanding businesses.

Why London remains a positive place to expand internationally:

1. The Talent is in place.

London has been a digital hub for international business expansion since the first dot-com boom at the start of the millennium. This hasn’t changed simply because of Brexit.

Statistics claim, 78% of businesses in ‘digital technology’ cited the ‘identification of talent,’ as a concern in 2017 for successful expansion. Therefore, would choosing another hub, as your landing point, where the talent isn’t as assessable, make sense?

2. The Community already exists.

A professionally driven Community helps quick adoption of new concepts and London certainly has that advantage, built up over years of evolution. If you go to certain bars in Charing Cross or Shoreditch, they are full of ‘digitally native’ individuals from different businesses interacting and putting their digital world to rights. If your business operates in this type of environment and you proactively participate in the London digital community, it will almost certainly reap positive rewards.

3. Infrastructure is in place and barriers to entry are incredibly low.

London has been a business hub long before it was a digital hub. Consequently, the ability to quickly set up a business and establish a base, whether it be an office or ‘shared space’, is instant. Moreover, the infrastructure from a Telco and technical perspective is strong.

You may consider these elements a given. Yet, that is not the case in some instances. Consider these problems elsewhere for example: In Paris, the ability to lease an office space is currently near impossible and what’s available is generally low quality. In Stockholm, the ability for foreigners to rent a property is fraught with difficulties, and although improving, the infrastructure in Malta and Cyprus is comparatively poor.

4. No language barrier.

The business language in London is English. Plus, you find every nationality, in the digital space, operates with impeccable English.

All other expansion options, outside the UK apart from Dublin, use a primary language you are less likely to speak. Like it or not, if you try and enter those markets with English, it creates instant barriers.

For example, Berlin is increasingly becoming an ‘international’ city and business in generally done in English. However, certain areas, like infrastructure and legal, are still conducted in German. This instantly creates problems for your expansion and time spent solving problems, opposed to conducting business.

Why London may present issues for the international growth of your business:

1. Business in London may become more expensive?

Now, I am certainly no economist and this point is certainly up for debate, yet, I believe it to be pertinent in this discussion.

Since the announcement of Brexit, the Pound (GBP) has decreased in value against many other currencies, including the Euro (EUR). If we assume the elements of ‘free trade’ brought by the EU will no longer exist, the downward trend will continue, which can be attributed to the cost of doing business rising with more borders in play.

2. Where will the ‘International’ Talent go?

Statistics suggest, up to 40% of the digital workforce are not of British origin and this stat is steadily increasing. Whether non-British workers will be allowed to stay, post-Brexit is currently in debate.

Therefore, if you want to grow your business post-Brexit, the question arises: will this Talent be able to stay in the UK and still be available for your business?

We will need to see how the political negotiations pan out. Undoubtedly, there will be some middle ground agreed, but how it impacts your businesses ability to, quickly and efficiently, hire the finest talent has yet to be seen.

3. There are viable alternatives to London.

Even pre-Brexit, digital organizations are taking advantage of other expansion locations besides London, such as Dublin and Berlin. These regions, although not to the same degree, can offer the talent, the community, and the infrastructure, available in London. Having options is always a fantastic way to internationalize your business should things, like Brexit happen and bring an uncertain future.

4. Will London maintain its critical mass in terms of spend?

Currently, London has the Talent and Community and subsequently, it can boast critical mass in terms of business done on a daily basis. Many argue this will maintain London as a viable hub. Yet, if the community is lost, will business be maintained? It’s not yet clear but it would certainly have an impact and the ability to do all of your EMEA business from London would certainly be more difficult.

Brexit has raised many questions about the future of international expansion into London and whether it will maintain its status as a vital hub for business within the EMEA. It is still unclear of what will happen once the UK is no longer part of the EU. Yet, you may need to make decisions for your business now.

The best approach is to consider all possible options and outcomes, in order to make the best decision for your business and its future.

It’s a difficult decision, let us help you.

We have over 8 years’ experience helping business deal with international expansion. We will work with you and help you develop a strategy, allowing you to attract the top talent, achieve your goals and maintain your vision and value.

Get in touch.

For more information about International Expansion, check out: How to expand internationally and succeed.

This article was written by Martin Collins, Founder & Managing Director at Red Executive.

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