The latest Brexit extension has struck hesitancy into the heart of London’s venture capitalist scene as funders delay investments in the UK tech sector.
Almost a quarter of the capital’s technology startups have suffered a drop in VC funding since the end of 2018 following the EU’s decision to postpone Brexit until 31 October.
A survey by Tech London Advocates found that 23 per cent of startups have experienced a deferment in funding, while 39 per cent of tech firms say it is harder to access capital.
TLA founder Russ Shaw said the research should serve as a “warning sign” to the government to secure a Brexit deal as soon as possible.
“There is a growing sense of anxiety of how this is all going to play out, it’s not clear,” he added.
“That’s really permeated into the mindset of people, particularly investors looking at early stage, pre-seed businesses.”
Those fears come despite London securing its reputation as a global fintech hub in 2018, as it attracted close to double the amount of VC cash as its nearest European rival.
London is on track to target San Francisco’s fintech crown as it currently boasts the same number of fintech unicorns valued over $1bn – 29 – as Silicon Valley.
But nearly two-thirds of TLA members told the organisation they fear it will become harder to attract funding if the Brexit uncertainty continues.
But Shaw said a softer Brexit could lead to a “mini-boom” in investment.
“There’s so much pent-up demand and currently VCs aren’t necessarily investing as much because they want to see how it pans out,” he said.
“The gates will open up and the money will flow.”
However, Shaw warned a hard Brexit could scare VCs off London’s investment landscape.
“Investors may look elsewhere to deploy funds and businesses may look to open up in an EU country or hire staff in another land,” he said.
He said the survey showed that the latest Brexit delay was behind investors’ scepticism because it prolongs the political uncertainty looming over the UK’s economy.
“I was worried right after the referendum that investment levels would drop and it didn’t happen,” he said.
“Now [VCs think] are we really going to hit that [deadline] or is it another six months of uncertainty?”