Google's Grand Design

But the technology industry has been remarkably resilient so far.
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Google's announcement this week that it will go ahead with plans to build a new office building in London is being hailed by the government as a vote of confidence in post-Brexit Britain.

Not so fast. Alphabet Inc., Google's parent, started planning the 1 billion-pound ($1.2 billion) King's Cross campus three years ago, so this amounts to more of a re-announcement than a new zeal for Britain. The company simply needs to add space to house its growing staff: the current building houses 2,500 people and the new one will hold 7,000 more.

Since the vote, there has been much hand-wringing over whether London will be knocked off its perch as the preeminent hub for the region's technology companies. Reports of a startup failing or the takeover of chip designer ARM Holdings Plc, one of Britain's true tech success stories, are seized upon by both camps as evidence their predictions are true. 

Advanced Economy

Advertisers in the U.K. have long spent more on online advertising than television.

Source: Magna Global, Bloomberg Intelligence

It should be no surprise Google is expanding in Europe's biggest English-speaking country. Online advertising accounts for a bigger share of the U.K. market compared with television than in the U.S., and e-commerce is well-established too. Building a bigger office makes sense as a business decision. It shouldn't be read as a political one.

Much like the wider economy, the Brexit vote is showing limited signs of hurting the technology industry so far.

Venture capital investments into U.K. start-ups slipped just 2 percent in the third quarter from the year-earlier period to $919 million, according to CB Insights and KPMG. Crowdfunding has also slowed for the first time in five years, according to research firm Beauhurst.

Early Signs

After falling before the vote, VC investments into U.K. startups are showing signs of a rebound

Source: CB Insights and KPMG reports

The ranks of information and communications workers, as well as those in professional and scientific jobs, actually rose in the third quarter, according to the Office for National Statistics Labour Survey. The Mayor of London is, as you would expect, bullish. According to a survey his office commissioned, the number of digital tech jobs in the city will grow by 18.5 percent over the next ten years.

It's premature to read too much into these figures. Fintech startups are vulnerable because Brexit may limit their ability to offer financial services in the European Union. Some investors are already abandoning the sector, according to a report by Innovate Finance. For startups in other industries, it will take at least a year to find out if VCs have soured on Britain. 

Once Britain leaves the EU, some things could get better for tech companies. The country may take a more business-friendly approach to data protection than Brussels and loosen its tax rules. Bear in mind the European Union is cracking down on Apple Inc. and investigating Inc. for their alleged tax minimization techniques.

Curbs on immigration could cause pain. Walk into the offices of Google or Facebook Inc. in London and you'll hear a tangle of European languages spoken. These are companies that have pick of the best engineers from across the continent. If they can't hire them in London, they will hire them overseas.

European Largesse

The European Investment Fund accounted for 37% of money put into British VC funds from 2011 to 2015.

Source: Invest Europe

Lastly, it would certainly not be good if the European Investment Fund, which deploys billions of pounds to foster small and medium-sized companies, stops backing British venture capital funds. As the above chart shows, such a move could limit their ability to support innovative companies.

Celebrating a shiny new Google building that won't open until 2018 may make people briefly feel good. Figuring out Brexit's impact on the technology industry may take as long as the construction project.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

    To contact the author of this story:
    Leila Abboud in Paris at

    To contact the editor responsible for this story:
    Edward Evans at

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