“As Britain ponders life outside the European Union, one city is poised to capitalize in the event of a Brexit: Berlin.” In the few weeks since the Brexit vote, this claim by Politico has shifted from a possibility to reality. While London has been holding strong as a hub for startups over the past decade, much of the its appeal was its connection to Europe. Now that Britain has chosen to leave the EU for independence, companies are looking for a new door to the European market, and Berlin is ready to take that spot.
There are many reasons why companies in every sector are looking to move now that Britain is leaving the EU, one of which is concern that, without the oversight of Brussels, the UK will create new laws that may not align with those of the rest of Europe. Companies worried about new regulations, taxes, and compliances are looking to avoid legal headaches by moving to a location still in the EU. For startups, in particular, this is a real concern. The possibility of changing regulations means that the privacy laws and data protections startups have depended on to ensure their products are safe and trustworthy are no longer guaranteed if they keep their London offices. As tech companies start looking for a new location, Berlin, with its already booming tech startup scene, is a prime choice.
Another issue for startups in London is the potential loss of free movement for Europeans. One of the main platforms for the “Leave” campaign was the closing of Britain’s borders and restricting the free movement that is a cornerstone of the EU. A study done by Wayra in 2015 found that one third of employees in Britain’s tech startups were from other countries, which means closed borders could pose a real financial threat for Britain’s startups. Damian Kimmelman, the founder of London’s DueDil told the Guardian that “The UK’s startup scene, nurtured by international venture capital and skilled workers’ willingness to move here, was starting to create global challengers — and thousands of well-paid jobs. Development will now stall as companies struggle to find the staff and cash they need to scale.”
This makes Berlin all that much more attractive as a new location. As of 2015, 14% of Berlin’s population was from over 189 countries outside of Germany. And with the recent flow of highly skilled migrants into Germany, the labor market in Berlin is growing more attractive by the day. For companies worried about their foreign employees, Berlin would be a perfect choice for relocation. Even Berlin’s economics minister, Cornelia Yzer sees Berlin’s potential, and has already spoken about setting up an office in London to advertise its advantages over another location. “Call it an economic embassy for Berlin,” she said.
However, Berlin may face many challenges in trying to match the scale of London’s startups and investments. While Berlin passed London in investments in the third quarter of 2015, numbers have been falling back to earth in recent quarters. London has also largely remained a favorite for investors because it is seen as a gateway to both Europe and the U.S.A. due to the access to global financial markets and language. While Germany may be just a connected with international markets, and often seen as a smart choice for companies looking to expand to Europe, it will be hard to match the convenience that Britain offers.
Berlin may also struggle in attracting London’s startups because the two cities have been growing in different sectors. Though Berlin is quickly growing in digital technology startups, it is lacking in financial technology companies. Currently, London is seen as not only the fintech capital of Europe, but a hub for international banking as well. It’s easy to see how those two services are linked, and with two years of negotiations ahead of the UK before any new policies take hold, Britain is already looking for ways to adapt their market to keep financial companies from leaving.
Still, compared to London, Berlin now offers not only cheaper rent, but access to the EU and all its employees, a stable and widely used currency, and the promise of a secure future. Add to that a flourishing digital technology scene and Berlin becomes the only logical choice for companies looking to move after Brexit. While Berlin doesn’t offer the same access that Britain did, it does offer peace of mind for companies and their investors. For many, that’s worth the move.
MAKERS’ community of entrepreneurs, investors and experts helps digital innovators turn their vision into reality. The Berlin-based company was founded by Friedrich A. Neuman and Marius Schulze in 2013. MAKERS helped building 8 companies with a combined revenue of more than €60M to date. Across the platform, MAKERS companies employ more than 120 people from 25 countries.
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