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Published on 14th November 2018

Small Firms Bear the Brunt of Brexit Tech Talent Crunch

In early summer 2016 business was humming for Jack Bedell-Pearce, managing director of 4D Data Centres. For nearly a decade he helped the company grow from a domain registration and hosting provider to a strong local data centre enterprise, housing the digital infrastructure for small businesses across the United Kingdom dipping a toe into the tech economy.

Bedell-Pearce was in the process of hiring a senior network engineer, a role that oversees the maintenance, connectivity and network infrastructure of servers, making sure data stays safe and online. Candidates with relevant experience and qualifications for the highly technical role are hard to come by, he says.

Then the UK voted to leave the European Union.

Within three weeks, two of his top candidates—both from the EU—withdrew their applications. One realized the value of a paycheck in pound sterling had dropped and chose to pursue opportunities (and a salary in Euros) in Germany. The other said he simply felt unwelcome in the country. Bedell-Pearce said he’s seen a sharp drop in applicants from across Europe ever since.

“They’ve just stopped applying,” he said. “That was felt across the board in the tech sector.”

Losing out on tech talent from abroad is causing concern as Brexit draws near, especially amongst the UK’s small-and-medium enterprises (SMEs).

Multinational corporations can entice workers with larger paychecks or move workers to other offices in Europe, but smaller firms—even in industries that are poised to weather the worst of a potential Brexit storm—are losing recruits or investing in costly training and benefits in order to stay competitive.

“Founders and CEOs of small tech companies are incredibly busy and their key focus is driving growth,” said George Windsor, insights lead at Tech Nation, an industry group for digital tech in the UK. “Obviously talent is a really important way they can scale their firm and getting the right people on board is incredibly important, but it does mean than they have more limited resources than larger firms.”

Fast growth, but talent crunch looms

The UK tech industry is growing 2.6 times faster than the rest of the UK economy--now worth nearly £184 billion, according to a Tech Nation report released in May--but has consistently warned of talent shortages that could slow the momentum.

89 percent of UK technology professionals surveyed in a study by Robert Walters, Jobsite and Totaljobs published this August said they anticipate some level of skills shortage in the next year. Nearly half of highly skilled workers from the EU were considering leaving the UK sometime in the next five years, a Deloitte report released last summer found.

In the past, migration from Europe and elsewhere “has been the mechanism that has been used in the short term” to plug these gaps said Windsor. Nearly one in five of the digital sector’s 3 million workers are foreign-born, and a third of those are from the EU, according to statistics from industry group TechUK and Frontier Economics released last year.

While the portion is relatively low, TechUK noted that foreign-born workers—driven mostly by those from the EU—accounted for 45 percent of net employment growth between 2009 and 2015. Furthermore, Tech Nation and Nesta reported last December that non-UK tech workers are more likely than UK workers to have advanced degrees.

“Talent is most certainly one of the key factors in continuing the growth of the tech sector as we’ve seen in recent years,” Windsor explained.

Talent has to be top priority, founders say

To keep the talent coming in the midst of uncertainty, many businesses have increased their offers: Immigration law firm Migrate UK surveyed 1,000 UK human resources professionals and found two in five companies had offered benefits valued between £10,000 and £60,000 extra to secure a candidate—a financial strain on an organization just getting off the ground.

“With tech startups especially, we’ve had a growing number who have approached us to apply for sponsor licenses because they need to hire a specialist to come in,” said Jonathan Beech, managing director at Migrate UK. “That is an indicator that they are finding it difficult to hire Europeans.”

To keep the industry’s momentum going from the ground up, talent has to be a top priority founders say. Simon Hansford, CEO of cloud provider UKCloud, told Parliament in February that filling vacant jobs was the “number one inhibitor to growth.” Furthermore, he noted it is already difficult as a medium-sized enterprise to compete with larger firms and flashy startups.

“And clearly if talent disappears, or it’s harder to get, it becomes even harder for us,” he said.

Though Brexit negotiations are still underway, the UK government has made it clear that tech employment is a priority. This summer the government unveiled a startup visa specifically for founders, and health occupations were excluded from the Tier 2 visa cap, which opened more slots for highly skilled workers in tech. Tech Nation visas –a special category of Tier 1 visas focused on digital tech skills—doubled last year. In the long-run, industry are optimistic that Brexit offers the opportunity for business-friendly immigration overhaul. There are also increasing efforts to upskill local workers and improve technical curriculum in schools.

On the ground, policy promises mean little

But for those who lead small tech firms, such as Bedell-Pearce at 4D Data Centres, waiting on more legislation would only mean losing a competitive edge.

The UK data centre industry has remained strong even amidst Brexit fears, maintaining steady growth and a consistent lead in the European market through this year. The technology underpins the digital economy and growth across the wider tech sector has boosted demand.

But one out of every five technical roles in the industry are filled by non-British staff, according to research by the Edge Foundation, and various industry reports indicate the average age of a data centre manager is male and in his mid-50s. A talent crunch looms.

Bedell-Pearce has taken matters into his own hands. He frequently talks with colleges and universities about bringing more engineering curriculum to students and advocates for increasing diversity in the field. In the near-term he heads up a development program at 4D, providing in-house training to new staff.

“There’s a greater cost associated with that but it’s just something you have to do in order to survive,” he said.

Note: This story was written as part of my MA in Financial Journalism at City, University of London.

Image credit: Pexels