Unravelling UK immigration policy: options and obstacles for start-ups

Unravelling UK immigration policy: options and obstacles for start-ups

Attracting and retaining top tech talent can be hard for all companies, but particularly so for start-ups. Although there is of course homegrown tech talent, there is also a need for UK companies to look overseas when hiring people. The UK, therefore, needs to offer attractive options to live and work in the UK. Elli Graves, Senior Immigration Advisor in the immigration team at law firm, Kingsley Napley LLP, explains the different options which start-ups can consider when employing someone from abroad.

Harnessing innovation and embracing developments in tech has rightfully been recognised as instrumental to the UK’s future. It is vital to our economic growth, and virtually every sector, public and private, sees tech as the way to drive growth and deliver better and more resilient services. The government hopes to promote innovation through various initiatives and policies, thereby cementing the UK’s status as a tech superpower. For example, the government is investing heavily into domestic science and tech start-ups to encourage private funding and to accelerate the expansion of our STEM industries. However, word on the start-up street is that while these Treasury policies are welcome, they must be accompanied by changes in immigration law and policy to ensure the UK can attract and retain the talent it needs.

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 market.

Tech founders relocating to the UK have two main options:

• Global Talent (Tech Nation) visa
• Innovator Founder visa

The Global Talent (Tech Nation) visa

The Global Talent visa is an excellent option that offers maximum flexibility to those who are able to convince Tech Nation assessors that they are, or have the potential to be, a leading talent in digital technology. The criteria for endorsement is high, and perhaps a little rigidly focused on product-led digital tech companies, but are ultimately achievable for those with a strong industry profile. The closure of Tech Nation last year without a clear plan for who was to take over the operation of the visa caused some alarm, but thankfully Tech Nation has continued to process these applications and the government has now announced a tender for the new endorsing body, with a contract to be agreed by 2025. We can also perhaps hope that whichever organisation wins that tender might improve the criteria for endorsement.

The Innovator Founder visa

Under the Innovator Founder route, which replaces the previous start-up/innovator routes, visas are available to applicants who can convince one of the approved endorsing bodies that 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 stage, meaning it can often be difficult to complete an immigration journey on this visa route. It is also significantly more restrictive than the previous entrepreneur route and this is reflected in the tiny number of people who have made use of this visa since its introduction.

Immigration considerations 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 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. There are also minimum skill requirements for the role and salary requirements for the sponsored worker but, beyond these points, the Skilled Worker route is relatively straightforward and a number of obstacles to sponsorship were removed in preparation for Brexit to allow for the impact of removing freedom of movement for EU citizens.

Can you meet the Skilled Worker minimum salary requirement?

However, the government recently announced an increase in how much sponsors need to pay from spring 2024. For new hires the minimum general salary threshold will go up by nearly 50% from £26,200 to £38,700, and the going rates (minimum salaries for different occupation codes/job types) will be updated and increased to the median salary for each occupation code. Salaries for existing Skilled Workers will 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. These include:

• Spouse visa (those who are married to British citizens are permitted to work with minimal restriction)
• Status under the EU Settlement Scheme
• Graduate visa
• High Potential Individual visa (HPI)
• Global Talent visa
• Student visa (which can allow limited working in some situations)
• Scale-up visa (which is a hybrid between sponsorship and being able to work on a self-employed basis. It applies to high growth businesses)

Counting the costs

A lot of start-ups find themselves employing young talent on a student, HPI 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 start-up 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 reintroducing obstacles to skilled migration 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 that 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, with 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 next 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.

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