What the US shut-down means for UK start-ups
One of the most publicised impacts of the US federal government shut-down is the cancellation of thousands of flights to and from and internally in the USA due to shortage of air traffic controllers who are currently not getting paid. Clearly this will affect travel to the US by UK start-ups seeking to do business or raise finance there, where face-to-face meeting is essential at least in the initial stages of a transaction. Visas for highly-skilled workers are delayed with consequent uncertainty around hiring and retention and detrimental impact on scale-ups which need the talent to grow. Supply chains may also be impacted.
The shut-down adds to the already tumultuous geopolitical climate around the world and in the US in particular; investors such as private equity and venture capital firms, are already suffering from slow fundraising and a lack of exits; this will only add to the lack of confidence and the cautious approach to investing going forward. IPOs are delayed because the SEC has furloughed many staff. Start-ups may find their procurement contracts with US agencies delayed impacting on cash flow. Customers may lack confidence to place orders.
If the US shut-down continues for the longer term there could be some beneficial knock-on effects for UK start-ups as US VCs may seek more opportunities outside the US for investment; already some 1 in 5 UK deals have a US investor, this proportion could increase. High skilled talent may seek work opportunities in the UK where there is less disruption.
The overall effect of the US shut-down is one of uncertainty with delays to funding, regulatory approvals, and procurement all with a detrimental impact on cashflow, which is the lifeblood of start-ups and scale-ups.
