Anti-immigration policy is killing European tech

Increases in immigration to Europe since the pandemic have given politicians ample material for election campaigns. Despite illegal immigration making up just a fraction of net migration to Europe, recent weeks have seen Poland’s ruling parties rehashing anti-immigrant strategies, the development of the U.K.’s controversial plan to send illegal immigrants to Rwanda and France’s far right exploiting recent riots to push their anti-immigrant agenda.

And in a turn that has baffled the business community, skilled migration — a lifeline to the U.K.’s talent-stifled technology industry — has also become the target of anti-immigrant policies. This summer, U.K. prime minister Rishi Sunak raised the cost of working visa applications, which, according to some sources, would burden businesses with up to £10,000 in fees per skilled worker. Additionally, the U.K. barred international students from moving with their families, further threatening the talent pipeline for British startups.

Anyone who has worked in a European startup will tell you it’s very unlikely you’ll be on a team with everyone from the same country. Despite just 15% of the U.K.’s population being foreign-born, 39% of the country’s fastest-growing companies are set up by foreign-born entrepreneurs. Looking to the U.S., foreign-born citizens are 80% more likely to set up a firm, and of the 582 tech unicorns (companies valued at over $1 billion) that existed in 2022, 55% were founded by immigrant entrepreneurs.

In their quest for tightly controlled borders, European governments seem to have forgotten how essential immigration is for the growth and prosperity of our sector. As someone who grew up behind the Iron Curtain in Estonia, I’ve seen what shutting borders does to an economy. I think we can learn from how, in just two decades, pro-immigration and a dedication to nurturing the startup community has made Estonia into a tech power that now boasts more unicorns per capita than anywhere else in the world.

Tech industry: Facing a skills crisis

The tech sector, like all industries, has been hit by recent global economic challenges. According to Atomico, startup funding has dropped by 50% from its 2021 peak and by 38% since 2022, following a worldwide trend. As founders, our survival relies on building products and teams that are resilient.

Since the pandemic, hiring has become a major hurdle to growth. Unemployment is at a historic low across Europe, while job vacancies are at an all-time high. Simply put, there aren’t enough local workers to support the growth of sectors like technology.

A 2022 report from Tech Nation, a U.K. tech research group, found that out of 14.85 million vacancies in the U.K., a staggering 2 million were in the tech sector, comprising 13% of all job openings. It’s a global and industry-wide problem. The Korn Ferry Institute predicts that the talent shortage will cost governments and companies $8.5 trillion by 2030.

As a founder of a fast-scaling company, I’ll always look to solve problems with the path of least resistance. When it comes to hiring, the most straightforward solution is to tap into countries with surplus talent in roles essential for booming sectors like AI, engineering, and cybersecurity.

And while places like the Philippines, India, and Nigeria have a surplus of outstanding technical talent, the arduous process and high cost of obtaining working visas make hiring from these countries a founder’s nightmare.

Losing talent to other ecosystems

There’s also the issue of losing talent to other startup ecosystems. Despite the U.K.’s accelerator programs and VCs welcoming global founders, the U.K. has a problem retaining the businesses it nurtures. The U.K. is witnessing a growing trend of founders starting out in the U.K. and then establishing their businesses elsewhere in Europe, where ecosystems in countries like France and Germany have matured considerably over the past few years. Founders I’ve spoken to who have set up shop there say hiring is a major pull — it’s far easier to hire internationally in wider Europe compared to the U.K.

Not creating the conditions for startups to flourish and scale also means they’re likely to look elsewhere when it comes to listings in the future. Earlier this year, neobank Monzo moved its operations to San Francisco, followed by British chip giant Arm, which moved its primary listings to New York in another blow to London.

Estonia: A case study

Estonia serves as a prime example of how embracing international talent can drive an entire sector. With four times more startups than any other country in Europe, Estonia has produced 10 unicorns, including Skype, Playtech, Wise, and Bolt. Per capita, it stands as the European leader in unicorn production, boasting 4.1 unicorns per million inhabitants, outpacing Luxembourg’s 3.1, the U.K.’s 1.6, and Germany’s 0.6.

The success of Estonia’s ecosystem has clear benefits for the economy. Last year, the tech sector was responsible for 8% of GBP in Estonia and 10% of all the employment taxes.

Estonia’s sustained growth isn’t by chance; it stems from intentional policies promoting innovation and immigration. Initiatives like the Startup Visa program, Estonia’s e-Residency, and the Digital Nomad Visa (now adopted by multiple European states) have collectively cultivated a tech landscape attracting global investment and expertise. An average working visa for a foreign-born worker is just €244. Currently, 32% of Estonia’s founders and 29% of startup employees are of foreign origin, fostering genuinely global teams. At Jobbatical, for example, our team comprises 26 different nationalities and counting.

Palpable tension

A palpable tension exists between the tech community and Europe’s political campaigns. How can we become leaders in AI, engineering, and sustainability if our political environment and archaic visa and immigration processes make hiring the best minds a painstaking and costly ordeal?

Tech sectors that a decade ago would have been considered gambles for founders, like Estonia, France, and Germany, are evolving at a pace that challenges established tech hubs like the U.K. Governments need to be actively fostering environments conducive to long-term, thriving business setups. The tech industry thrives on talent; further limiting our access to it is a disservice.

Governments need to create environments where founders and their teams can imagine building lasting and successful businesses. Tech relies on international talent and cutting off our talent supply is a self-inflicted wound.

Reference: https://techcrunch.com/2023/10/17/anti-immigration-policy-is-killing-european-tech/

Ref: techcrunch

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