— Laurel Ruma (@laurelatoreilly) June 29, 2016
Seeing as Laurel called me out- it’s basically double-edged swords all the way down. Yesterday I did some grief, but now i’m looking at acceptance. But politics is moving so fast right now it’s very hard to say with any certainty whether Brexit is even going to happen or not. For a TLDR video version see my vlog below.
Q: Will all the banks, financial services, accounting and legal firms move (with their IT workloads) to Frankfurt?
A: No. Some firms undoubtedly will move but we’re unlikely to see a “new” London emerge any time soon. There are going to be big businesses that up sticks and leave, for sure, but likely to a number of different EU cities, rather than just one. London has been a friendly half way house for US businesses, opening doors to expansion in the EU since we joined the institution. The UK has been the “market friendly” bit of the EU. We won’t be able to play that role so well any more. And for professional services, the loss of “passporting” (you’ll hear that term a lot in the next few weeks, Ben Judah is all over it) if it happens, which allows for services business to operate in borderless fashion with the EU, could indeed see London decimated. Let’s not forget, on the other hand, that Brexit could also help to solidify London’s position as the world’s preeminent centre for tax avoidance and yes, money laundering. Hot money loves London and I don’t see that changing any time soon. The big US banks feel they have won already – their people aren’t about to move to Paris or Frankfurt and start paying significant tax if they can help it.
As my colleague Fintan points out, the one workload flight we can be assured of now is the one into the Cloud. I wrote a bit about cloud geo/data governance here recently.
Q: Will all the Web giants and Unicorns move to Ireland?
A: This was already happening to some extent – Apple, Google and Amazon see Ireland as a highly skilled English-speaking country with a low tax base, enabling the double Irish and the Dutch Sandwich tax avoidance for good measure. Apple is planning a vast data centre in Ireland, so big it’s said that it will increase the nations’s energy requirements by 8%. Google though has been building a massive complex in Kings Cross, in the heart of London and I don’t see it cancelling that plan anytime soon. I can see the massive new Amazon office from my window here in Shoreditch, and it’s important to remember that England is a nation of shopkeepers because England is a nation of shoppers. We consume things and businesses like consumers. After the Brexit we’re likely to see corporation tax further reduced, which will also be attractive to global firms.
Q: Will all the startups move to Berlin?
A: Brexit is definitely a shot in the arm for an already thriving Berlin startup scene. Again, like the move by Web giants to Ireland, this was already a thing. Why I’m Leaving London has been a trope for a while. Software developers and entrepreneurs that already have kids are far less likely to move out in droves. Talking to startups in my coworking space – notably Andiamo and Weaveworks they see investments in Berlin as additional to, rather than instead of, investments here, at least for now. Weaveworks COO Matthew Lodge has some interesting thoughts on the Brexit subject in Quora here.
Also – Berlin commercial and residential property prices can only increase. It could be that Brexit on the other hand will force a correction in London’s overheated commercial property. Let’s not forget the currency slide. If a company is funded by American VCs the slide in Sterling means their US Dollars can now go further.
Hiring talented young people in London is about to get a lot harder. Why would an awesome 23 year old programmer or data scientist come here from the continent come where they’re apparently not wanted. I know of at least one firm currently hiring, and CVs from the continent literally dried up overnight last Thursday. Advantage Berlin. Yesterday David Cameron announced there would be no amnesty for European immigrants that are already living and working here – which was both stupid and insensitive.
London needs to get its shit together fast – we live or die on our reputation for being open, tolerant, welcoming and fun-loving. We need more Gay Pride, less self-love.
Q: Why are you talking about London so much?
A: Because that’s where so much of the action is. I have no plans for a safari to Sunderland any time soon. I still remember the lump in my throat as I saw the first result come in.
Q: Why are you not talking about tech?
A: Because geopolitics and community are the things that actually matter. When it comes to impacts on the tech industry – open source will keep on doing its thing, being the way we build software. Margins will continue to be squeezed though – traditional Big Enterprise IT suppliers are going to find it harder to make sales in the UK, and Europe, owing to uncertainty, which we can expect to become the new excuse du jours for missed earnings over the next few quarters. Once we sign article 50 (if passporting gets nuked) we can expect some juicy systems integration contracts signed as European organisations build apps to take on, for example, Euro clearing. Cloud just gets another shot in the arm because of uncertainty – it’s a great excuse to pull the trigger on that AWS, Azure, GCP or SoftLayer plan for infrastucture, or transition to SaaS apps. Already anaemic Global growth will take a hit, so investment across the board will slow.
(Read this and other great posts @ RedMonk)