How UK VCs are managing the risk of a ‘no deal’ Brexit

Published August 28, 2019

Grab your economic zombie mask: A Halloween “no deal” Brexit is careening into view. New prime minister Boris Johnson has pledged that the country will leave the European Union on October 31 with or without a deal — “do or die” as he put it. A year earlier as the foreign secretary, he used an even more colorful phrase to skewer diplomatic concern about the impact of a hard Brexit on business — reportedly condensing his position to a pithy expletive: “Fuck business.”

It was only a few years ago during the summer of 2016, following the shock result of the UK’s in/out EU referendum, the government’s aspiration was to leave in a “smooth and orderly” manner as the prelude to a “close and special” future trading partnership, as then PM Theresa May put it. A withdrawal deal was negotiated but repeatedly rejected by parliament. The PM herself was next to be despatched.

Now, here we are. The U.K. has arrived at a political impasse in which the nation is coasting toward a Brexit cliff edge. We’re at the brink here, with domestic politics turned upside down, because “no deal” is the only leverage left for “do or die” brexiteers that parliament can’t easily block.

Ironic because there’s no majority in parliament for “no deal.” But the end of the Article 50 extension period represents a legal default — a hard deadline that means the U.K. will soon fall out of the EU unless additional action is taken. Of course time itself can’t be made to grind to a halt. So “no deal” is the easy option for a government that’s made doing anything else to sort Brexit really really hard.

After three full years of Brexit uncertainty, the upshot for U.K. business is there’s no end in sight to even the known unknowns. And now a clutch of unknown unknowns seems set to pounce come Halloween when the country steps into the chaos of leaving with nada, as the current government says it must.

So how is the U.K. tech industry managing the risk of a chaotic exit from the European Union? The prevailing view among investors about founders is that Brexit means uncertain business as usual. “Resilience is the mother of entrepreneurship!” was the almost glib response of one VC asked how founders are coping.

“This is no worse than the existential dread that most founders feel every day about something or other,” said another, dubbing Brexit “just an enormous distraction.” And while he said the vast majority of founders in the firm’s portfolio would rather the whole thing was cancelled — “most realize it’s not going to be so they just want to get on.”