Tech industry Brexit horror story spells out potential harm to UK

This week I wrote an article about a promising UK start-up with a Brexit horror story. The startup, based in North East England is one on the growing group of insurtech firms.

Honcho, as it is known, is an alternative to the price comparison websites for buying car insurance. The mobile app lets people put in their details and have bids sent to them from insurers. This is rather than looking for the offers. It also allows the insurers to see what competitors are offering through a process which sees them bid three times. This is to drive competition.

So as you can see it is a good idea. Price comparison sites were the first disrupters in the insurance sector and it is perhaps time for them to be disrupted themselves. Insurtech, as new tech in the sector is known, is the big thing in fintech at the moment.

But back to the Brexit angle. Honcho was about to launch with £650,000 capital investment which emanated, via a venture capitalist firm, from the Joint European Resources for Micro to Medium Enterprises (Jeremie). This is part of the European Investment bank fund, which is shared by organisations across the UK.

But due to the uncertainties about the final deal between the EU and UK this funding was put hold indefinitely.

So just as it was to launch it lost the money it was going to user to fund the launch. Honcho has set up a crowdfunding initiative on Crowdcube. It has already raised over £300,000 in a week.

The start-up sector is particularly vulnerable to uncertainty and Brexit as can be seen in this story is one of the biggest threats.

But it is not just the startups that might suffer but the UK’s future potential as a place to set up tech startups. You only need to lose a few to startup hubs in   other parts of the world and you get a snowball effect. This is because these companies often operate in communities where there is an ecosystem giving them access to expertise.

The commercial director told me startups can’t wait around until the money is released if a deal is agreed between the EU and UK. By then it might be too late.

There are other examples of startups finding themselves in a potentially difficult situation after Brexit. Many fear, that when the UK leaves the EU they will no longer have access to the customer base, funds and staff that attracted them to set up in the UK in the first place. Some are looking long and hard at some of the alternative startup hubs across Europe.