How UK companies can stay in UK, but manage their EU business with e-residency
I was invited to speak on a panel organised by YBorder about the future of tech recruitments in the UK yesterday and there seems to be some angst and uncertainty in London about what is going to happen in the post-Brexit world. What will be the conditions of Brexit? How many smart people will leave? How much will the economy be affected? Let’s talk about how the Estonian e-residency can help.
When a truck with the slogan “Keep calm and move to Berlin.” appeared in London, it made a lot of locals angry. It’s understandable — 60% of Londoners voted “remain”. They did not want to leave the EU, and now somebody (and not only Berlin) is using that to lure businesses away.
But there is a way for companies to keep their people in the UK (if they wish), while still staying in the EU with Estonian e-residency. Before I go into details, let’s take a look at some quotes from Parag Khanna’s great book “Connectography: Mapping the Future of Global Civilization” to understand the consequences of Brexit on the UK and other countries as well.
“GEOGRAPHY IS DESTINY ,” one of the most famous adages about the world, is becoming obsolete. /…/ Thanks to global transportation, communications, and energy infrastructures — highways, railways, airports, pipelines, electricity grids, Internet cables, and more — the future has a new maxim: “Connectivity is destiny.”
More connectivity creates a world beyond states, a global society greater than the sum of its parts. Much as the world evolved from vertically integrated empires to horizontally interdependent states, now it is graduating toward a global network civilization whose map of connective corridors will supersede traditional maps of national borders.
To most new economy companies, connectivity has become much more important than geography and nationality. That connectivity to other countries is now at risk for UK tech companies — and that could hurt their business.
As populations, wealth, and talent concentrate in global cities, they gradually supersede countries as the world’s key gravitational centers. Cities today are ranked by their influence in global networks, not by their territorial possessions.
That has surely happened in the UK — London is gaining a million new people per decade and is the driving force of UK economy. And like a boy from the countryside who goes to study in a big university in another country grows apart from his relatives, London has developed in a separate direction from the rest of the UK. More connected to other countries, more diverse, more technologically advanced.
It’s a bold statement, but I think people in London are more similar to people in Berlin and Amsterdam than the people in northern parts of England.
Connectivity brings individuals the choice to belong to other places than those they do or to have loyalty to multiple places at the same time. We now incorporate some measure of our own sense of self-worth by our connectivity, not just our cultural and national identities.
Cyber civilization expands along digital rivers and tributaries much as human civilization has grown along natural ones. The map of the Internet is constantly changing, enabling new communities while remapping existing ones. Rather than national digital clusters connecting the way governments do, virtual communities assemble dispersed individuals and transcend physical geography. With the rise of digital e-residency schemes such as Estonia’s, borders are no longer synonymous with formal membership in “national” services.
In a world where technology is decreasing the importance of country borders, Brexit is a threat as a creator of more borders. Sure, the conditions of Brexit are still unclear and can turn out to be not so harmful. But businesses do not like uncertainty, and I am seeing many UK tech companies mapping alternatives to stay in the EU market.
Estonian e-residency offers a unique solution for that. It is a government startup in a way — making Estonian fully digital services available to foreigners, too. After getting the e-residency card, a company can be digitally established in 15 minutes and taxes and all financial reports filed location independently.
It’s a product that fits the new world that Khanna is describing: it doesn’t matter where you are — you can still fully manage the administration of your company. Since Estonia is a member of the EU, this also gives the access to EU markets.
Surely it’s not a solution that will work for everybody — if an e-commerce company is selling physical goods from the UK, the tariffs will still be a problem. But for companies selling digital services, this could be helpful in keeping operations in the UK the same as they were before by creating a subsidiary in Estonia with e-residency, which guarantees the EU business continuity.
Fintech companies can tap the regulatory “passport” to reach all EU markets; companies working with data can be a part of the EU Single Market directive. And even if a brit wants to open a bar in Portugal, this business can also operated with the Estonian company and managed from distance with e-residency.
There is a growing dissonance in what a tech company needs and what countries are currently offering. Most companies think in terms of connectivity and not countries with their own regulations. The biggest economical success of the European Union has been creating a single market that allows businesses to operate across borders. Sadly, Brexit is a step away from that. The world is not ending though — the e-residency example shows a flexible way for UK companies to stay in the EU.
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