I’m not going to attempt to explain Brexit or guess where it’s going — Whatever I say about it will probably be outdated by the time I hit the “publish” button. But I will say that it’s providing a platform for risks that we want to mitigate.
We have seen reluctance from prospective European customers to take on our platform because they have unaddressed concerns about the nature of the relationship their nation-states might have with Britain in the future. We have also been turned down by a couple of European investors citing that while they wanted to take part in our business, they have concerns around how their investments may be functional in a post-Brexit Britain. We think their concerns are justified, and we don’t want to just wait it out and hope for the best because hope on its own is not much of a strategy.
“We feel that you have made a very good start. Unfortunately, we have taken the decision to put a pause on investments in UK based companies for now while the impact of Britain’s exit from the EU is clear.”
Quote is taken from an email from a prospective investor from a few days ago
We had not taken action so far because we were thinking that by now, the UK Government would have made some progress in setting up measures to prevent “crashing out”, especially in light of the business lobby expressing deep concern around the status quo. But it’s August, and things seem more ambiguous and disorganised than we forecasted.
This isn’t just about long-term strategy alone; we are regrettably experiencing damaging uncertainty on an operational level. For one thing, our incubator is generously funded by ERDF and we don’t know exactly what that will look like in the (now seemingly more likely) event of a no-deal Brexit. We don’t know if we’re going to have a roof over our head in a few weeks time, and that’s not acceptable from a business ops perspective.
Businesses are trusted based on their products and services, but above all, customers (and investors I should say) value stability and robustness. They want to know that the service providers they select are going to be around for the foreseeable future. They want to know that their information assets are safe. And they want to know that they are protected as consumers.
Furthermore, our business is data. We have worked extremely hard to ensure that every facet of our offering is designed with European standards in mind, and we have no intention of shifting that bar in a direction which compromises on our clients’ faith in us. Our customers and users expect (and deserve) to be protected by EU regs (including but not limited to GDPR).
Anyway, I digress.
We decided to re-register Nucleus, in mainland Europe, by utilising Estonia’s e-residency programme.
Our primary motivation is giving EU customers the reassurance that their data continues to reside within the European Union. It’s a standard procurement requirement nowadays, and it’s not something we can currently guarantee because we don’t know what Brexit means for data regs yet. Beyond the data regulations, we as a team have benefited greatly from the EU, its funding, and access to its large market, and have no appetite for discontinuing this relationship.
We have secondary concerns — For example, we are worried about not being able to recruit the right talent as we scale. Europe holds some of the world’s most talented engineers and developers, and we always want to be able to tap into that resource, without fears around a lack of freedom-of-movement which Brexit poses. For another example, we want to ensure that we have access to Europe’s VC funds in a frictionless and painless way for everyone involved.
Where are you going?
We have families, cats and puppies here in the UK (Bristol to be specific) so any geographic relocation is not a decision we would take lightly. For now, we are just expanding the business as far as company registration and data assets are concerned to maintain access to EU markets.
Where is the company going to be registered?
We think our best option at this moment in time is Estonia’s e-residency programme. We have started the process and will update our website and privacy policies in due course.
It means we can continue to live in the UK for now, but keep a door open for EU customers to work with us.
We have also considered Dutch and German registration but found that the entry barriers to be significantly greater at this point in time. We may re-evaluate this in the future.
Are you going to avoid paying UK taxes?
No. As long as the majority of our business and residency is in the UK, we will continue to pay UK taxes. That includes VAT, income tax and corporation tax.
When/if the majority of our business starts manifesting in another nation-state, our taxes will move to that nation-state, in line with whatever tax treaties are in place at that point in time.
What does this mean for our products (and your data)
We currently host our applications, servers, databases and virtual firewalls in London. We have made the decision that in the event of a no-deal Brexit, we will move all of our infrastructure to mainland Europe, with the exception of privately hosted instances where the service owners have opted to remain within the UK datacentres (E.g. We expect certain industries such as defence customers to want to remain hosted within the UK).
This (again) is not a decision we take lightly. Moving the majority of our infrastructure in such a drastic way will likely result in an outage and some additional costs. Alas, we think this is vital in order to ensure that we are fully compliant with GDPR.
Just to be clear, GDPR does not in any way mean that data can’t reside outside of the EU — only that data leaving the EU must be protected to the same level that it would be protected within the EU. It’s just easier and simpler for us to re-house the data estate in the EU than it is to attempt to evidence that the data enjoys the same level of protection in a non-EU datacentre.
We will communicate this move and plan it in liaison with affected users at the time.
If you’ve been affected by Brexit in a similar way, or if you want to let me know that you feel that everything is going to be fine and I’m over-reacting, please leave a comment below 👇 or reach out to us in some way. (hello [at] nucleus.ac)