There were smiles all round at the Treasury and London’s City Hall this week after Google CEO Sundar Pichai (pictured) announced a £1bn investment in a new UK headquarters on Tuesday.
Due to open by 2020, the 10-storey, 650,000 square foot building will go up next to the tech giant’s existing offices in London’s Kings Cross and accommodate up to 3,000 additional employees. The company already employs 4,000 people at the campus.
Chancellor Philip Hammond hailed the news as a “big vote of confidence” in the UK following the country’s decision to leave the EU and subsequent fears over a slowdown in foreign investment.
London Mayor Sadiq Khan also welcomed the news, adding: “London isn’t just the tech capital of Europe, we are on the shoulder of New York and we are catching up with Silicon Valley.
“Investment into the capital post-Brexit remains robust, so Google’s expansion will further strengthen our city’s reputation as a global leader in digital technology.”
Pichai, who made the announcement during a visit to London, said that even though the UK has voted to leave the EU, it was still an attractive place to do business because “historically, the UK has been an open and connected economy [and] we are optimistic that this situation will continue”.
Reuters' Paul Sandle reported Pichai as saying that computer science had a great future in Britain, citing its talent pool, leading educational institutions and passion for innovation as indicators of this.
“We understand there is uncertainty and even concerns about topics like Brexit … but we know for certain that web and digital technology will be an engine of gowth for the UK for years to come,” Pichai added.
Reuters' article
UK firms hesitant
For pro-Brexiteers, Google’s announcement was a much-needed piece of good news after Monday saw the release of a downbeat report from financial services firm Hitachi Capital about the current appetite for investment among UK businesses.
Sky News reported the results of a poll of more than 1,000 senior businesses executives, which found that, in the wake of the vote for Brexit, one-third of British businesses had either cancelled or postponed plans to invest – decisions that amounted to £65.5bn worth of lost investments.
The survey, conducted by YouGov and the Centre for Economic and Business Research on behalf of Hitachi Capital, revealed that more than one-fifth of business leaders cited the devaluation of the pound as one of the main reasons for holding back on investing.
The possible impact of Brexit on the UK’s economic health was cited by 21% of respondents and the same number said uncertainty over Britain’s future in the EU Single Market was making them hesitate.
£65.5bn
The value of investments postponed or cancelled by UK firms after the Brexit vote
That last factor is perhaps the most significant brake on investment: 70% of respondents said they would be likely to resume their growth plans if uncertainty around single market membership was resolved.
Hitachi Capital CEO Robert Gordon urged UK businesses to seize the opportunities Brexit afforded rather than exercise undue caution.
He told
Sky News: “Exports from the EU to the UK totalled £290bn in 2015, firmly cementing the UK’s place as a crucial trade partner. With this in mind, businesses must not forget that we are in a strong position when it comes to ensuring that the UK negotiates the best possible trade deals.
“We must pull together and continue to make investments to send this message to the rest of the world. Looking outwards, not inwards, is how the UK will thrive in a post-Brexit world.”
Sky News article
Google deal a no-brainer
Gordon may want UK businesses to demonstrate the same level of confidence in the UK that Google has, but on Wednesday,
Bloomberg Gadfly columnist
Leila Abboud poured cold water on that particular party with a reminder that Google first started planning its £1bn investment three years ago. That made Monday’s announcement more of a “re-announcement”.
Since 2009, UK advertisers have consistently spent more on online versus TV advertising, which makes Google’s decision to expand into Europe’s biggest English-speaking country – where, incidentally, e-commerce is well established too – a bit of a "no-brainer", Abboud wrote.
She reckoned Brexit could still hurt investment in the UK. CB Insights and KPMG reported a slight rebound in venture capital (VC) investments in the UK start-up sector – up to $919m (£738m) in Q3 2016 versus $843m (£677m) in Q2 – but Abboud said it would take at least a year for VC’s true sentiments about the UK to filter through to actual investment activity.
Investment activity in the fintech sector may be an early indicator of what is to come.
Innovate Finance, the industry body for Britain’s fintech community, reported that while VC investment in the sector globally was up 27% on the year at the end of Q3 2016, in the UK, investment fell 26% during the same period. That followed an even heavier annual fall in the preceding quarter of 33% – something that analysts attributed to uncertainty in the run-up to the EU referendum.
Once Britain leaves the EU, there are likely to be ups and downs, said Abboud. It may have the freedom to introduce more business-friendly regulation, but curbs on immigration could cause major recruitment headaches for employers. Even Pichai admitted that he has concerns over potential restrictions on skilled immigration and free movement of people.
As ever, uncertainty remains the winner.
Bloomberg article
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