Brexit Threatens Growth in Austin and the U.K.

Editor’s Note:  This article was published by the World Affairs Council of Austin on June 21.

Fred Schmidt is unequivocal about the June 23 Brexit vote, the British referendum on whether the country should stay or leave the European Union, and its impact on Austin.

“Linking EU and U.S. economies with TTIP [the Transatlantic Trade and Investment Partnership] is where the future lies.  “It would be mind boggling for Britain to leave the EU and its massively successful economies of a union with linkages of economies and people.”

The start-up city takes London

Schmidt, an ebullient entrepreneur and director of international affairs for the Capitol Factory, was just awarded an MBE by Queen Elizabeth for his role in developing the economic partnership between Austin and Hackney. The relationship, which was formalized as a sister and science city partnership in 2014, serves as a springboard a partnership that’s expanding across London’s other 32 boroughs and into Europe. In fact, on June 23 Schmidt will be in London with United Kingdom Trade & Investment department, as part of the Austin delegation to London Technology Week, the annual festival of all things innovative.

It should be quite a week for Austin’s role as “the start-up city.”  London Tech Advocates, a private-sector led coalition of tech and community movers and shakers plans to announce its launching an Austin chapter to cultivate the sister and science city bond Schmidt and the Austin- Hackney team started, focusing on creative tech, gaming, education, life sciences and biomedical, food tech, fashion tech, mobility innovations, zero waste, and advanced manufacturing. The announcement will be made during London Tech Week.

A global protectionist environment

Since Britain would be the first country to leave the EU, no one know exactly the ramifications of an exit would be. Brexit polls showing the “Leavers” neck-to-neck with those who want to remain in the EU.  But the general tenor is that a Brexit would not be good news for Austin companies with offices in Britain, or for British-based businesses here.

“Only the economists and other realists are planning,” said Schmidt. “But the implications (of Brexit) are clear.”  That is, London would no longer be the default gateway to the European Union.

Then there is the headquarters question. “When considering opening a European headquarters, Britain is an automatic choice because of the shared language and access to the Eurozone. If Brexit happens, companies will need to calculate whether to open their headquarters on the continent or open a UK branch managed from either the continent, Ireland, or the U.S,” said Robert Bou, president of Austin-based Ashlar-Vellum which designs computer-aided design and 3D modeling software.

Those of you who were lucky enough to attend the Texas-EU summit in May heard Caroline Vicini, deputy head of delegation of the European Union to the United States, talk frankly about the challenges TTIP faces, one two major trade deals opposed by both presidential clients. Speaking of straight talk, protectionist policies stunt growth no regardless of size. (Slight tangent: For an intriguing view from the perspective of the Fortune 10, read General Electric Chairman Jeff Immelt’s graduation speech to NYU’s Stern School of Business.)

Though not everyone thinks Brexit would hinder London’s growth. Nowhere else can hope to compete with London’s status as “the talent magnet for Europe. No other place comes close,” Richard Florida, an urban theorist and director of cities at the Martin Prosperity Institute in Toronto, told Bloomberg Technology in February of this year.  Along with New York, “it is one of two economic centers of the world,” a reality that wouldn’t be significantly altered outside the EU.”

Life will move on  

Schmidt is sanguine. On June 23, “we’ll be cryin’ tears of joy or sadness in some pub that night,” said Schmidt, “And then life will just move on.”