In recent months, unicorns have seen their reputation tumble. Where once they were enchanting, fabled creatures, the word unicorn is now more likely to be used in reference to an unobtainable Brexit outcome. Yet it is another kind of magical beast, not wishful thinking on Britain’s departure from the EU, that will help determine the country’s post-Brexit future.
I am referring to the elite group of high-growth firms, which include the likes of Uber, Deliveroo, and Monzo. These unicorns are all privately-owned tech companies valued at over $1 billion. They have disrupted stagnant markets, driven down costs and opened up new opportunities for all. Due to the jobs and tax revenues they provide, unicorns should also command a special sense of adulation from governments. But this has not always played out in their favour in public policy debates.
For a new report from the Centre for Policy Studies, we spent months talking to funders, founders, and directors of high-growth firms – some of whom were already unicorns, and some of whom were striving to become one. Time and time again, we heard two factors brought up which stifle the growth of such firms, preventing them from further growth: access to finance, and access to talent.
Our report contains plenty of proposals to better connect capital with the companies that need it. Here, however, I want to concentrate on what the government can do to help them attract the talented employees that any successful business depends on.
For ill or for good, the United Kingdom is set to leave the EU. That means the British government will have the chance to independently shape policies that for decades it has offshored to Brussels, including on immigration.
The government has already sketched out its immigration plans in some detail. Last December, the immigration white paper detailed the ending of free movement, and the institution of a ‘skill-based’ system with no cap on ‘skilled’ workers.
Naturally, the government’s moves in this area are being watched closely by employers of all types. Yet, high-growth and unicorn companies look on with especially keen interest – hardly a surprise given that three quarters recruit internationally, and already rely heavily on European talent in particular.
The government’s plans are still subject to changes as it passes through Parliament. We believe that one such change should be the creation of ‘unicorn visas’, designed specifically for companies with high-growth potential, allowing them to more easily access the talent they need to flourish and expand.
At the moment, young and rapidly growing firms experience a unique set of challenges in terms of recruiting. For instance, it is not uncommon for such firms to offer equity compensation rather than a full salary – in other words, employees are remunerated with a stake in any future profits, instead of a conventional monthly pay cheque.
Expanding firms may favour equity compensation because it means as much capital as possible can be directed into investing in the business itself. On the face of things, therefore, employees taking equity compensation appear not to be getting paid as handsomely as the actual case may be. Importantly for our purposes, it also means they may not surpass the minimum salary threshold – £30,000 – which, as the white paper currently stands, a migrant worker needs to be earning to enter the country.
Or consider the profile of many of those hoping to work for an ambitious, high-growth firm. They will typically be younger than average, perhaps only just out of university, looking to move into the labour market for the first time. No matter how relatively talented these would-be employees are, realistically, few will command a salary equivalent to the current proposed minimum threshold – especially if coupled with equity compensation.
Indeed, one graduate consultancy found that just two degree pathways – dentistry and chemical engineering – churned out graduates earning an average starting salary of £30,000 in the UK last year. Thus, here too one finds concern among existing and would-be unicorns with respect to Britain’s new immigration system.
Some will argue that if companies are experiencing skills shortages, it is incumbent on them to train up UK workers, instead of just importing in talent. Yet, when it comes to quickly expanding firms, as so often the case is for eventual unicorns, the time necessary to do so simply isn’t available to them – thus highlighting another disadvantage of an inflexible immigration system for fast-growth companies in particular.
To its credit, the government does include language in the white paper which indicates it will investigate further how future arrangements can reasonably accommodate both the practice of equity payment and recently graduated individuals whose salaries may fall short of the proposed minimum threshold for skilled workers. We are confident that our idea of unicorn visas would help solve these issues for this sector, and ensure that Britain’s most dynamic and innovative tech companies can access the talent they need to prosper and fulfil their potential.
Compared to many of its global counterparts, the UK boasts a flourishing ecosystem of truly innovative tech companies – including more than a dozen of those most lucrative, unicorn firms.
Yet that is not to say Britain cannot do better. On attracting top talent to the UK – perhaps the number one area of concern cited by those in the sector when it comes to ensuring Britain sustains itself as the unicorn capital of Europe – the government must ensure there is no regression as the country departs the EU.
Thankfully, this is not a controversial statement. While immigration may split public opinion, copious evidence exists which shows people do distinguish between unskilled and skilled immigration – and are highly supportive of increasing or at least maintaining levels of the latter.
A future framework complemented by unicorn visas would point Britain in direction – as other countries are demonstrating – by providing blossoming businesses with talented workers from overseas when they cannot be found at home.
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