The Great British immigration scandal: Young, gifted, foreign - and shut out of the UK

Immigration controls are stifling recruitment of tech-savvy workers from outside the EU, and are stunting UK economic growth. MT visits London's vibrant Silicon Roundabout to meet the foreign entrepreneurs bringing much-needed skills to the UK.

by Elizabeth Anderson
Last Updated: 04 Sep 2013

The grand terraced houses of Folgate Street in Spitalfields, built by refugee Huguenot silk weavers in the 17th century, are a reminder that east London's rich, cosmopolitan identity has been formed through centuries of migration.

Just up the road, the streets of Shoreditch are attracting a new wave of youthful, energetic migrants determined to create the next big thing.

But unlike previous generations - the Huguenots fleeing France or the Jews fleeing Russia in the 19th century - they come from everywhere. Australians, Russians, Brazilians and Indians are choosing to set up shop in the east of the city. Attracted by relatively cheap rents and the creative, bohemian vibe that Shoreditch offers, they are united by the desire to be at the heart of Europe's entrepreneurial tech hub.

'It's a great community round here,' says Alex Berezovskiy, the Russian-born founder of start-up consultancy firm Leto, based just off Old Street roundabout. 'You're around lots of start-ups and it's really cosmopolitan. I'd guess about half the people I meet here are British. The rest come from America, New Zealand, Russia - everywhere.'

For foreigners like Berezovskiy, one of the main attractions of starting a business in the UK is that there is access to a wide talent pool within the EU. But challenges come when firms want to hire from outside the region.

Britain's immigration policy is bureaucratic, costly and difficult to navigate, and a visa application can take months to process.

As one founder of a marketing agency start-up, who asked to remain anonymous, put it: 'We often get approached by people from abroad looking for a job. There is some good talent out there but the hoops that we are required to jump through to hire them are incredibly off-putting, and the cost, time and risk are just too much.'

Political pressure to cut immigration threatens to kill off the goose that lays the start-up egg. The government is steaming ahead with an immigration clampdown, which aims to slash the net migration figure from 200,000 to tens of thousands. Work and Pensions Secretary Iain Duncan Smith has urged UK firms to 'give a chance' to unemployed young Britons, rather than relying on foreign workers.

But businesses argue that the UK's education system has left school leavers ill-equipped for working and lacking relevant skills and training.

Roberta Lucca, Brazilian co-founder of Bafta-winning, Shoreditch-based games company Bossa Studios, says about half of the 35 people she employs were born somewhere else.

Roberta Lucca, founder of Bossa Studios, says the visa rules seem to change every month'We need people who know how to code and make games, and that can be tricky to find internally, especially because the games industry has lost many people to countries like Canada in the last decade,' she says.

'The visa rules seem to change every month,' she adds. 'I understand there's a problem with immigration but it's not skilled people that are skewing the balance. Britain should be revelling in bringing the best people into the country and keeping them here.'

The skills shortage is being felt by many of Lucca's peers.

Last April, the Government said companies could only sponsor individuals in 'highly skilled roles' and left many of them facing a talent shortage. 'It's hard to find British students who are interested in joining a start-up tech business,' Berezovskiy says. 'International people have got more drive and are not so risk averse.'

As the UK struggles to shake off the deepest recession in recent history, the area nicknamed Silicon Roundabout is thriving. There are at least 3,200 firms in the area - double the number in 1997 - and 48,000 jobs have been created, a report by the Centre for London calculated last year.

From a handful of start-ups in backstreet offices, the area is now home to a number of international successes, including Tweetdeck, and Moshi Monster creator Mind Candy. Google has opened a seven-storey hub that offers desk space and mentoring for technology companies.

The Government has championed Shoreditch's economic potential, giving the area a £200m regeneration boost, and PM David Cameron has set out ambitious plans to develop the inner east London area into 'one of the world's great technology centres'.

Essential to its success are the skilled, tech-savvy foreigners who have brought much-sought-after technical skills to the cluster.

It is hard to get an exact number, but from a sample of 34 companies in the area last year, at least a quarter of the founders were foreign-born.

The workers they hire are a mixture of British nationals and imported talent who help companies build global networks and get an edge on the competition. 'Having a diverse workforce means companies can plug into countries they might not be familiar with,' says Max Nathan, a researcher at the London School of Economics and co-author of think-tank Centre for London's Tech City report. 'If a London-based firm hires someone from India, that person can help you access markets in India, for example.'

But in the flighty and competitive world of tech start-ups, finding talent is difficult.

'Despite the economy suffering, barely a week goes by when I don't hear of someone struggling to fill a position,' says Nicole Vanderbilt, who was born in Florida and came to London 10 years ago, and now heads the UK office of New York-based online marketplace Etsy. 'There's always a shortage of something.'

Squeezing the entry routes into the UK has left many businesses unable to grow as fast as they would like.

'If companies cannot find ways to overcome these hurdles in order to attract the brightest and the best, it is questionable how long Silicon Roundabout will remain open for business,' warns Mary Croydon, an immigration specialist at law firm Lewis Silkin.

Skilled, tech-savvy foreigners are essential to Silicon Roundabout's success

In 2010, the prime minister pledged to cut net migration from around 216,000 to below 100,000 a year by 2015 - an ambitious goal. The Home Office can't stop residents in the European Union coming and going as they please, so it has targeted non-EU workers and foreign students to achieve its current tally of 180,000.

Foreign students, who used to have the automatic right to work for two years in the UK after finishing their course, now have just a few months to find a sponsor willing to pay them at least £20,000 a year.

In the year to the end of September (the latest figures available from the Home Office), work-related visas were down 4% on the year before to 145,604, the lowest recorded figure using comparable data. Similarly, 26% fewer study visas were issued.

For people of exceptional talent, there is an annual cap of 1,000. In 2011, just seven of these visas were granted.

The Government's drive to clamp down on skilled workers and students is crippling start-ups and stunting the UK's economic competitiveness, business lobby group the CBI warns.

Even Conservative mayor Boris Johnson has spoken out against the UK's inhibitive visa policy, warning that the many stipulations involved mean Britain is losing business to Australia, the US and Canada.

Britain retains many features that make it a favourable business environment. It is one of the few countries where you can start a limited company in 24 hours, and its geographical location means businesses have easy access to both Asia and the Americas.

There are tax breaks for seed funding and the Government has introduced an Entrepreneur Visa to entice people over (although entrepreneurs have to prove they have at least £50,000 of financial backing).

The success of Britain's tech industry contrasts with the fortunes of the UK economy as a whole, which is barely growing at all.

Britain's digital economy contributed £121bn to the UK economy in 2010 (8.3% of GDP) and is forecast to rise to £225bn by 2016, research from the Boston Consulting Group estimates. As people working in the digital field tend to be highly skilled and highly paid, these jobs have a multiplier effect, supporting employment elsewhere.

'The positives always outweigh the negatives when it comes to immigration. Bringing in skilled, entrepreneurial people will help businesses prosper,' the LSE's Nathan argues. 'It will stimulate trade because we will have more innovation. On the consumption side, immigration will help the population grow, which will raise the level of consumer demand and give people more variety. People may find the cultural differences difficult in the short term, but a diverse workforce is more beneficial in the long term.'

The UK is limping behind fast-growing developing countries and is sliding further down the global economic league table.

If young, talented foreigners feel Britain doesn't want them, they will take their skills to other countries, which will welcome them with open arms.



As Skype's first employee, Taavet Hinrikus spent seven years transforming the Estonian-based company into a service used by many millions. But Hinkrikus, 31, always dreamed of starting his own company.

In 2011, he took the plunge. With a fellow Estonian, Kristo Kaarmann, he launched Transferwise, a London-based peer-to-peer currency exchange that allows customers to send money to one another without paying the commission fees charged by banks.

'London is naturally the best place in Europe to start a business,' says Hinrikus, who moved to London in 2006. 'It's the most entrepreneurial, certainly in terms of tech, and it's great to have similar-minded people around you in the east London hub.'

In its first year, customers transferred £10m using Transferwise, saving half a million pounds in fees (banks typically charge between 3% and 6%). The business has grown up to 30% a month and in December it hit the £50m mark.

Based in the Tea Building on Shoreditch High Street, with another office in Estonia, Transferwise has 20 staff and Hinrikus aims to treble that by the end of the year.

The problem, he says, is finding the talent: 'Great people are incredibly hard to come by. If you employ someone from outside the EU, that's when it's really complicated and expensive. As a small company, we don't have an HR person, so it's something I would have to do on top of everything else. The process of importing highly skilled talent has to be made easier. It's counterproductive if the Government doesn't support job creation and it will start getting in the way of growth.'




Australian-born Alicia Navarro was one of the earliest arrivals at Silicon Roundabout. The 36 year-old is the founder of Skimlinks, an affiliate marketing site that helps businesses earn money through referrals.

Navarro took her first step into business with another online marketing site, Skimbit, but struggled to get it off the ground. 'I realised Australia was no place to run a start-up so I moved to London in 2007,' she says. 'The UK entrepreneurial scene is unique. London has its own personality and is supportive and intimate in a way the US will never be. A bunch of us started hanging out together a few years ago and it's now grown into something much bigger.'

Surrounded by fellow enthusiasts, the business flourished, tripling in size every year. A product is now bought through Skimlinks once every four seconds. Navarro employs more than 50 people - around 40 of those are in Shoreditch and the rest in San Francisco, where Navarro set up another office two and a half years ago. But she's committed to London. 'There's no way we would move the team now. There are great tax benefits in the UK and we have access to a large talent pool.'

Navarro employs workers from outside the EU on sponsored visas. Almost half of her employees are migrants from countries such as Australia, Sweden, Hungary and India. 'I find that product management skills can be in short supply in the UK,' she says. 'It took us a long time to hire a product manager and in the end we had to look to the US. I hope it doesn't change and become harder to hire from abroad. I pride myself on having a diverse workforce. Diversity is something that should be celebrated.'



Hoping to take on the likes of Asos, online fashion brand Stylist Pick snapped up Cheryl Cole as one of its first celebrity endorsers and in just two years has attracted £12.5m in funding and one million registered users.

German-born Felix Leuschner, 30, started Stylist Pick in late 2010. The site promises a shopping selection suited to each user's tastes and in the past year has also launched in France and Spain.

Leuschner grew up in Bad Homburg, a town near Frankfurt. He came to London in 2009 because he was attracted by the 'quirky, bohemian vibe' of the East End. 'No other European city can compete,' he says. 'It has a fast pace and great infrastructure. Berlin is a great city but it lacks vibrancy. It doesn't have the access to capital that London has. All the big VC offices are here.'

About 40 people work at its Clerkenwell headquarters and Leuschner has sponsored workers from countries including Australia and Canada.

Before hiring a worker from abroad, Leuschner says, he had to prove there was no one in the UK who could take the role. 'We couldn't find anyone suitable to be a project manager here. I happened to find one in Australia so made the effort to bring that person over. We just wanted the right person - it wasn't a case of discriminating one way or another. '

It was a long process, he says (it took about five months), but it wasn't painful enough to deter him. 'Making it harder would be a step in the wrong direction. The larger the talent pool that businesses can access, the better.'

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