Every year, Silicon Valley Bank takes the pulse of innovation businesses to find out how they are doing, from historic performance to future forecasts, and to truly understand how they are dealing with key issues impacting their business. Through our Innovation Economy Outlook survey, we study executives’ perceptions of this booming sector and gather feedback on the opportunities and challenges affecting their ability to grow. The overwhelming conclusion from our 2015 report is that the UK innovation economy is continuing to rapidly grow and as a result serves as a powerful job creator for the country’s economy.
In our survey, 99 percent of UK executives stated that that they expect their workforce to grow in 2015, but despite this promising outlook 96 percent still said that finding the talent they need is a challenge. As entrepreneurs look to scale their business, they need more than tech talent to develop a great product and to scale – they also need people with the skills to market it, sell it and develop their brand. While 60 percent of leaders said that STEM skills were the most critical skills needed in 2015, a surprising 35 percent said that they needed sales and marketing talent to drive business growth.
Year over year, we’ve seen that immigration policies are a significant issue for fast-growing innovation businesses. In 2015, 17 percent of these UK leaders said that immigration was their top public policy concern. In addition, 1 in 10 said the best way the UK government can help their business is to reform immigration policies so they can employ more foreign workers.
From data, and from talking with our clients around the world, we know that there is global competition for talent. Nearly every business we surveyed is looking to hire, but the proposed immigration policies could make the UK less competitive in one of the fastest growing parts of the global economy.
It’s worth noting that if businesses can’t hire global talent in the UK, they may decide to open offices overseas to recruit the talent they need. The best talent is globally mobile and could decide to focus their recruiting efforts in other parts of Europe which are more receptive.
On the supply side, younger startups rely on people with STEM skills, and this talent pool has not grown rapidly enough to meet increased demand. On the demand side, the strength of the UK’s innovation economy – the large number of startups being funded and the strong performance among later-stage businesses – means competition for talent is exceptionally fierce, especially with well established businesses trying to recruit more technical talent into their business.
A significant number of the Silicon Valley Bank’s US clients choose the UK as their preferred European headquarters. If the UK is perceived to be a country where it is hard to recruit sufficient talent and hiring foreign talent is also challenging, these businesses may turn to other European countries, with more flexible immigration policies, for their expansion. Organic UK businesses may also struggle to hire and a small talent pool could potentially encourage businesses to offshore their talent acquisition. These unintended consequences from immigration policies could hamper the growth of startups and encourage non-UK businesses to look at other European countries, like Ireland, creating longer term issues for the UK economy.
There is an inherent contradiction for countries wanting to grow their economy and limit immigration at the same time. Being supportive of startups means you need to be supportive of skilled immigration, as there is simply not enough domestic talent available in the UK.
In order to serve the growth needs of innovation businesses, the UK needs high-skilled immigration reform more than ever. Education and training will help, eventually, but new businesses that are forming and scaling will struggle to thrive without skilled talent. To our clients, who represent some of the most innovative and fastest-growing businesses in the world, this is not just an immigration problem – it is a talent problem, the Tech Talent Crunch.
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