# Are British innovators ready to overcome post-Brexit hurdles?
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2019-03-13
Category: BUSINESS
Category URL: https://financedigest.com/category/business
Meta Title: Brexit Uncertainty: Implications for UK Startups
Meta Description: Discover how innovative startups are adapting to Brexit's impact on data access and trade regulations to find opportunities in a challenging environment.
URL: https://financedigest.com/are-british-innovators-ready-to-overcome-post-brexit-hurdleshtml

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By **Antoine Baschiera**, CEO and Co-founder at Early Metrics

When it comes to the UK’s departure from the EU, all the cards are still on the table: soft Brexit, hard Brexit, No Deal, [delayed Brexit vote](https://www.bbc.co.uk/news/uk-politics-47373996)…Everything is possible which makes it particularly tricky for businesses of all sizes, and especially startups, to plan ahead.

In fact, a study conducted by the [Institute of Directors](https://www.iod.com/news-campaigns/news/articles/Nearly-a-third-of-firms-looking-overseas-due-to-Brexit) found that 40% of small businesses interviewed had no contingency plan in place due to the lack of clarity. Among the SMEs and startups that have already relocated due to Brexit, the “Finance and Insurance” sector accounted for the largest percentage of defection (17%).

As an active player in the European and international startup ecosystem, [Early Metrics](http://earlymetrics.com/) has had the chance to observe how innovative businesses are coping with the uncertainty clouding the future of the UK.

**Data beyond borders**

In the past years, businesses large and small have benefited from increased access to data as part of the EU’s [single market](https://www.financedigest.com/bagasse-tableware-products-market-will-top-us-3-75-bn-by-2031-as-consumers-proclivity-for-eco-friendly-and-single-use-product-purchase-grows.html "Bagasse Tableware Products Market will top US$ 3.75 Bn by 2031 as Consumers’ Proclivity for Eco-Friendly and Single-Use Product Purchase Grows"), thanks in part to the introduction of new regulation. For instance, PSD2 led to greater integration between [service providers](https://www.financedigest.com/unprecedented-constructive-disruption-to-drive-the-sleep-service-providers-market.html "Unprecedented, constructive disruption to drive the Sleep Service Providers Market"), notably through the collaboration of startups and financial corporates, resulting in the creation of innovative digital products.

Although the UK has its own “version” of EU regulations (e.g. [Open Banking](https://www.financedigest.com/why-open-banking-heralds-a-new-era-of-ecommerce-merchant-and-bank-collaboration.html "Why Open Banking Heralds a New Era of eCommerce Merchant and Bank Collaboration") as an equivalent of PSD2 or even the Data Protection Act for GDPR), sharing data between the UK and EU countries could get very complicated post-Brexit. As the government has [ruled out the possibility of remaining](https://www.financedigest.com/bank-of-england-consults-on-remaining-basel-bank-capital-rules.html "Bank of England consults on remaining Basel bank capital rules") in the EEA, it would likely lose the benefits it conferred in terms of leveraging the data of EU customers. This is a key point of concern for fintech startups as it will reduce their [data sources](https://www.financedigest.com/exclusive-tiktok-nears-deal-with-oracle-to-store-its-data-sources.html "Exclusive-TikTok nears deal with Oracle to store its data-sources") and consequently their scope for growth.

Moreover, there is a [risk that in the case of a No Deal](https://www.financedigest.com/iran-deal-a-wild-card-for-oil-market-strained-by-supply-risks-reuters-poll.html "Iran deal a wild card for oil market strained by supply risks – Reuters poll") the UK would have to undergo an adequacy assessment (in the form of Standard Contractual Clauses) with every single one of the EU member nations. A lengthy process that could take from 3 to 18 months according to [techUK](https://www.techuk.org/insights/news/item/14625-how-would-a-no-deal-brexit-impact-tech) and potentially stifle the growth of all British startups reliant on access to data.

**Making the best of a bad situation**

[Startups and especially tech](https://www.financedigest.com/italys-brembo-sets-up-venture-capital-arm-to-invest-in-tech-startups.html "Italy’s Brembo sets up venture capital arm to invest in tech startups") businesses have the advantage of flexibility on their side which can make them much more resilient to change than large corporations. Although a No Deal exit is not desirable, it could still represent an [opportunity for innovative](https://www.financedigest.com/maximising-the-opportunities-available-from-marketing-technology-and-innovation-focused-thinking.html "Maximising the opportunities available from marketing technology and innovation focused thinking") ventures. For instance, businesses operating in regtech, i.e. technology applied to the regulatory or legal environment, could see a [boost in demand](https://www.financedigest.com/cancers-and-infectious-diseases-is-expected-to-boost-demand-of-bacterial-antigens-market.html "Cancers And Infectious Diseases Is Expected To Boost Demand Of Bacterial Antigens Market") if they are able to provide solutions that automate and facilitate compliance to new policy.

Another thorny area where [startups could bring](https://www.financedigest.com/delivery-race-among-indian-grocery-startups-brings-road-safety-risks.html "Delivery race among Indian grocery startups brings road safety risks") value is the management of trade and customs. Given the historical background, the government is understandably trying to avoid at all costs a hard border between [Northern Ireland](https://www.financedigest.com/uk-considering-delay-to-northern-ireland-elections-ireland-minister-says.html "UK considering delay to Northern Ireland elections, Ireland minister says") and the Republic of Ireland. This begs the question: how are goods moving between the EU and the UK going to be monitored? The government has expressed its willingness to explore [technological solutions to avoid a border Backstop and this could represent a major opening for innovative](https://www.financedigest.com/cloud-professional-services-market-to-be-driven-by-technological-innovation-tmr.html "Cloud Professional Services Market to be Driven by Technological Innovation | TMR") newcomers. There are many startups developing smart sensors, complemented by IoT data [management software](https://www.financedigest.com/document-management-software-market-to-expand-at-a-value-cagr-of-12-3.html "Document Management Software Market to expand at a value CAGR of 12.3%"), which could allow the tracking of goods in a seamless and “softer” manner than traditional customs. AI image recognition [software and drone technology could also provide alternative ways to control the border in an unmanned and automated](https://www.financedigest.com/guide-to-the-most-affordable-marketing-automation-software.html "Guide To The Most Affordable Marketing Automation Software") fashion.

Furthermore, exiting the [single market](https://www.financedigest.com/child-resistant-single-dose-pouches-market-one-the-most-booming-industry-in-upcoming-years-due-to-global-demand-by-2031.html "Child Resistant Single Dose Pouches Market | One the Most Booming Industry in Upcoming Years Due to Global Demand by 2031") implies the end of free movement to and from the UK which raises the issue of tracking of people across the EU-UK border. Interesting developments in blockchain and AI-enabled [identity checks could prove useful to optimise the efficiency of migration management](https://www.financedigest.com/how-to-manage-identity-in-a-hybrid-cloud-environment.html "How to manage identity in a hybrid cloud environment").

Ultimately as long as the UK maintains its startup-friendly framework and pool of dynamic entrepreneurs and innovators, we can expect the British Fintech and wider tech scene to [successfully overcome any regulatory hurdle](https://www.financedigest.com/the-journey-to-cloud-native-overcoming-hurdles-to-drive-modernisation-and-achieve-long-term-success.html "The journey to cloud-native: overcoming hurdles to drive modernisation and achieve long-term success") that may appear. A No Deal scenario is likely to [bring the most disruption as well as a prolonged period of uncertainty](https://www.financedigest.com/analysis-end-of-furlough-brings-uncertainty-for-uk-jobs-and-economy.html "Analysis-End of furlough brings uncertainty for UK jobs and economy"). Hence we hope the government will reach an agreement on a deal in the shortest delays – for the sake of its startup ecosystem.


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