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Brexit: Startups’ EU expansion set to slow down

As doing business in Europe inevitably becomes less simple, speedy and cost-efficient, will startups begin to look elsewhere for suppliers, staff and offices abroad?

26 Jul 2016

The big difference between doing business in Europe compared to other countries was its simplicity. New taxes, tariffs, directives and even quotas on British companies trading with European ones will be thrashed out by Theresa May and her team in the coming weeks and months. The fear for small firms is the increased time and cost they will potentially have to shoulder in servicing European markets, and when recruiting – if the new paperwork required to take on EU staff is similar to that necessary for the US and Asian markets.

The impact on fast-growing firms could well be the speed of their expansion. Europe has been the go-to next step for a company looking to expand beyond the UK given its ease due to common market laws and proximity. Opening a European office, rather than continuing to run everything from the UK, has quickly become a likely option for many.

Although stifling EU laws were criticised by the Leave campaign, several companies said $1.3 June 16 23 24 July 1 8 they had used protection from the EU’s late payments directive to ensure certain customers paid on time. Similarly, initiatives to make services, such as finance and telecoms, available across Europe are reckoned to pose a major blow to firms in those sectors.

What the startups say

‘We’ve had great growth in France and Germany. It’s been easy to ship because of single certification for toys and electronics as well as the trade agreements in place. My worry is that new testing and redevelopment of products, and new sets of codes for fulfilment. It could be a real setback.’ Bethany Koby, Technology Will Save Us

‘We’re worried about import duty, and the ease of working with our suppliers in Portugal and Spain. Outside of the EU, you have to print five commercial invoices that require careful filling out of various codes and the values of products; they need to be individually signed and attached to parcels. It’s a massive strain on resource. If we had to do that for every country we’d have to either hire someone or outsource.’ Molly Goddard, Desmond & Dempsey

‘At the moment our sales to the EU are growing and we see it as a big market opportunity. But additional customs and legal hurdles will hurt our business. When we ship art to Switzerland and the US, we have to fill in customs forms, there are additional complexities and transactions take longer.’ Scott Phillips, Rise Art

‘The UK is still streets ahead in its attitude to regulation of fintech. We have very strong and stable structures, frameworks and safeguards that have been the basis of innovation around financial services. To cause this instability is a very un-British thing to do.’ Ed Twiddy, Atom Bank

This story is part of a special report on Brexit’s impact on startups – covering fintech, currency, investment, talent, regulation and funding – featured in Courier Aug/Sept.