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After Brexit
A Snap(chat) Vote of Confidence

Brexit, shmexit—Snapchat is making London the center of its global operations. Reuters reports:

The company, which has 150 million daily users globally, will book sales in countries where it has no local entity in Britain rather than routing them through lower tax jurisdictions like Ireland and Luxembourg as some other U.S. tech companies do.[..]

Snapchat started in 2012 as a free mobile app that allows users to send photos that vanish within seconds. It now employs more than 75 staff in London, up from just six a year ago.

Google said in November it would hire another 3,000 engineers and other staff in a 1 billion pound investment in London.

Facebook is expanding its presence by 50 percent, saying its engineers wanted to be in London, a city with an “amazing ecosystem” of technology and creative companies.

A Snapchat executive cited Britain’s strong advertising and creative industries in explaining the move, and Reuters focused on the importance of the London financial markets in its report. But a third reason for choosing London may well be the EU’s ongoing war against the internet. Brussel’s penchant for investigating foreign competitors, and various proposals for dirigiste regulation of the single tech market, do not make the Continent look attractive to digital-economy players.

“Silicon Roundabout,” London’s tech area, is no Silicon Valley. But by European standards, Britain has an enviable edge in tech. According to a study reported in Harvard Business Review:

By many measures, the UK is ahead of the others in terms of its digital foundations and sophistication; for example, the proportion of retail in the U.K. penetrated by B2C e-commerce is nearly twice the European average and higher than even in the U.S. The EC would also do well to harness intra-European rivalries that go back centuries, lately relegated to little else than the UEFA League, to get member states to compete with one another and inspire the laggards to catch up with their better peers. According to estimates by McKinsey, if France were to shift into a higher gear and equal the U.K.’s digital state, its total economic gain could be to the tune of Eur 100 billion.

It will be even more important for Britain to maintain this competitive advantage as it prepares to extract itself from the EU.

Of course, none of this will really matter for the UK if the big banks leave the country after Brexit. Right now, financial services is the driver of the British economy. But the banks haven’t left yet, and if finance is the industry of today, tech owns tomorrow. This puts the UK in a good position, which it must build on. And while Britain has to confront strategic economic questions especially directly, because of Brexit, every country really ought to be examining the issue. One place to start: why wasn’t Berlin (or Paris, or Rome) sexy enough for Snapchat?

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  • Disappeared4x

    “…why wasn’t Berlin (or Paris, or Rome) sexy enough for Snapchat?” Silly rabbit, Brexit is for kids. Lingua Anglicus is the new Lingua Franca.

  • ljgude

    I suspect this move is a result of Brexit. We have had a regime where US tech companies played all sorts of games involving EU jurisdictions most famously the Dutch Irish Sandwich which allows US companies to avoid the 30% tax on US corporation’s overseas earnings. Since Obama skilfully maneuvered his famous reform of this tax through a hostile congress all this is changed. Scratch that. Since Trump and the Republicans have made it clear that they intend to change the tax code to make it attractive to repatriate the billions sitting in Ireland where the EU has already ruled that Ireland has taxed it too lightly. Trump conferee, Tim Cook, declares he is going to fight. Clearly Snapchat’s decision had nothing to do with Brexit and I am Marie of Romania. As to the implication that the UK is a relatively minor tech player I would point out that Microsoft recently announced that they are moving general computing to ARM based chips and will only continue to partner with Intel for things requiring major computing power such as AR. As Carole King would say – Intel just felt the earth move under its feet. ARM is a British company that licenses its chip designs to others who manufacture them and those designs have been getting so efficient that Intel appears to be running out of effective responses. If you don’t know it ARM chips are what run smart phones and tablets and even some Chromebooks and now, in about a year, Windows computers. So Silicon Circle is not a quaint English byway complete with pub and resident Scottish Terrier.

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