Our immigration and visa partner, Kingsley Napley, offer an update on the Tech Nation Visa following the closure of Tech Nation. Read it below or visit their blog for this and other issue updates.
At a time when there is a global race for top tech talent, the UK needs to not only offer routes to live and work in the UK, but such options need to be attractive in order to stand out in an increasingly competitive international market.
Whether there is a change in government or not following the 4 July general election, immigration policymakers should carefully consider the UK’s current offering for tech talent and start-ups.
Options for individual tech founders
Tech founders relocating to the UK currently have two main options:
Global Talent (Tech Nation) visa The threshold is high for endorsement (applicants need to prove that they are recognised leading figures in the digital tech space), and the criteria is perhaps a little rigidly focused on product-led digital tech companies. Endorsement success is though ultimately achievable for those with a strong industry profile.
Innovator Founder visa The Innovator Founder route is available to applicants who can convince one of the approved endorsing bodies they have a business plan that is innovative, viable and scalable. This sounds great as a concept, and unlike the previous Innovator route there is helpfully no longer a requirement to show £50,000 in available start-up capital. However, successful entrants face overly prescriptive requirements at the settlement (indefinite leave to remain) stage, meaning it can often be difficult to complete an immigration journey on this visa route.
Key immigration questions for growing start-ups
For UK-based founders and start-ups, there are a number of immigration considerations when it comes time to grow their business and start thinking about building out their team.
Do you need a sponsor licence? For a business to hire someone from abroad, they most likely need to obtain a Skilled Worker sponsor licence and sponsor each migrant worker they want to employ. It is important the business has clear HR policies in place, established processes for checking the right to work, a system for keeping track of any sponsored employees and understands their obligations as a sponsor.
Can you meet the Skilled Worker minimum salary requirement? On 4 April 2024 the government dramatically increased how much sponsors need to pay Skilled Workers. For new hires the minimum general salary threshold went up by nearly 50% from £26,200 to £38,700, and the going rates (minimum salaries for different occupation codes/job types) increased from the 25th percentile to the median salary for each occupation code. Salaries for existing pre-4 April 2024 Skilled Workers need to be at or above the updated 25th percentile (not the median) for the relevant occupation code when they apply to change employment, extend their stay or settle. These announcements have caused consternation among businesses, and start-ups in particular. Data from Nation.better shows that 37% of tech start-up workers won’t meet the new salary requirement, particularly bright graduates for whom the average salary falls significantly below £38,700.
Do you want to hire a contractor? If a start-up wants to hire someone on a contractor basis, the Skilled Worker sponsorship route may not work. There are a number of UK immigration visa categories which allow people to work flexibly without the need to be sponsored, such as applying for a visa as a spouse, Graduate, High Potential Individual, Student or on the basis of being an EU citizen who was present in the UK before 31 December 2020.
How expensive is it? A lot of start-ups find themselves initially employing young talent on say a Student, High Potential Individual or Graduate visa. However, once they reach the end of that temporary visa, the costs for keeping them will be significant. In a world where start-ups are facing difficulty getting funding, the fees associated with sponsorship as well as the increased salary costs may be unaffordable. All in, businesses can expect in excess of a 50% increase in costs per sponsored worker.
Does the UK have a competitive offer for tech talent?
Though the Home Office claims that available routes can attract top tech talent, it’s unavoidable that increasing sponsorship costs and not introducing fully flexible routes make it harder for UK companies to compete in global markets. From speaking to our clients in the tech sector we know that the impression this gives is problematic. Whilst they understand that the UK has great homegrown talent, it highlights an unattractive and unsupportive attitude to business needs and short-sightedness to the fact that the tech sector needs talent now.
Although there are many reasons the UK remains an attractive ecosystem for entrepreneurs, we have to acknowledge that with access to capital reducing and the tax framework becoming less competitive, plus the lack of a UK digital nomad visa, there are a lot of other growing tech ecosystems where founders might choose to go. It looks like they are already starting to do so, with the percentage of fast-growing start-ups in the UK founded by immigrant founders having dropped from 49% to 39% between 2019 and 2023.
Whatever happens in the 4 July general election, the challenge the next government will face is how to ensure the opportunities presented in tech are not missed, and they will need to come up with more flexible policies to give start-ups confidence over their own and their company’s futures.
