Many in the tech industry aren't convinced that the current conveyor belt of international talent will continue when the country finally leaves the 28-nation bloc | Carsten Koall/Getty Images Digital Politics UK can’t make up its mind on tech Amid the country’s stalemate over Brexit, politicians and industry are divided on how to tackle the digital economy.

Digital Politics is a column about the global intersection of technology and the world of politics.

LONDON — There's a lot Britain can't agree on. Brexit. Who should be the country's next prime minister. Jeremy Corbyn's leadership of the Labour Party.

Add to that list: What to do about tech.

This week, London — still Europe's tech capital despite the ongoing political uncertainty — will play host to its annual "tech week" — part marketing ploy, part cheerleading fest to showcase what the British capital, and the rest of the country, has to offer when it comes to glitzy startups, venture capital investment and government support for the digital economy.

Yet in Westminster's halls of power, the hipster mecca of East London and the well-heeled offices of Mayfair, two rival factions are bickering over the health of the U.K.'s tech sector — and how it will fare once the country eventually leaves the European Union.

On one side are the optimists, those who cite the country's record tech investment figures since it voted for Brexit in 2016 as a sign that everything is going great. They dismiss the current political impasse as a mere speed bump on the road to the U.K. putting tech at the center of its future industrial strategy.

Surely it doesn't have to be a binary choice between pro-industry public policies and arguably one of the toughest regulatory clampdowns anywhere in the Western world?

On the other side stand the pessimists, who fret about the gradual slowdown of highly educated (European) tech migrants rocking up to fill much-needed jobs in both startups and legacy tech companies. On top of that, the government's aggressive push to regulate the industry — everything from proposed new digital taxes on Big Tech to greater policing of people's social media chatter — has raised eyebrows about its future support for local tech.

The stakes could not be higher.

The U.K. government has largely bet its economic future on the country's burgeoning digital sector. And so far, it can't make up its mind whether to double down on its assistance for local firms and international giants like Google and Facebook — be it through hundreds of millions of pounds of public funding or high-profile digital skills programs — or fall in line with politicians worldwide and the growing "techlash" against all things digital.

"They really need to attract investment funds to make sure the tech sector keeps growing," said Luca Schiavoni, a digital regulation analysts at Assembly Research, a consultancy firm in London. "But at the same time, it's really difficult to run into someone in Westminster who believes the tech sector doesn't need more regulation."

Case for the optimists

Surely it doesn't have to be a binary choice between pro-industry public policies and arguably one of the toughest regulatory clampdowns anywhere in the Western world?

But just like the other hot-button socioeconomic topics now confronting the British public, what to "do" about tech needs an answer. And it needs one quickly.

What's muddying the waters is how the local tech scene has fared since the 2016 Brexit referendum. Depending on whom you talk to, the country's digital economy is either full steam ahead or rocketing toward a cliff edge.

Figures published on Monday by TechNation (a quasi-government entity) paint a rosy picture, with U.K. venture capital investment last year hitting $8.7 billion — easily outmatching France and Germany to claim the top spot in European tech funding. The number of U.K. startups worth at least $1 billion in 2018 also reached 13, more than all similar fledgling firms in Germany, Israel and Sweden combined.

On top of that, local lawmakers have earmarked hundreds of millions of additional funding through the British Business Bank (another quasi-government institution) to help local techies, as well as a further £153 million in government funding, announced Monday for next-generation computing technology.

"Once you've got the basics like rule of law and functioning democracy, startups aren't going to do badly or well just because of the political situation," — Martin Mignot, French partner at Index Ventures

Industry veterans — many of whom invested locally, so have skin in the game to play up the positives — also highlight London's continued ability to attract top talent as reasons why Westminster's disjointed approach to the sector should not be cause for concern.

"The U.K. is not the only country having a problem with politics," said Martin Mignot, a French partner at Index Ventures, a London-based fund whose investments include TransferWise, a successful local foreign currency exchange startup, and Net-A-Porter, the British e-commerce giant. "But once you've got the basics like rule of law and functioning democracy, startups aren't going to do badly or well just because of the political situation."

Case for the pessimists

Not everyone is so sanguine.

While the U.K. government has increased the number of visas for foreign nationals looking to start a tech (or other) business, many in industry aren't convinced that the current conveyor belt of international talent will continue when the country finally leaves the 28-nation bloc.

Britain has already lost its top spot among EU destinations as the place to go for the region's tech workers, according to data from LinkedIn.

The uncertainty is making it harder for companies to justify future investment in Britain, according to Giles Derrington, associate director of policy at TechUK

In 2017, 14.9 percent of all Europe's tech talent headed to the U.K. in search of work, compared with 13.8 percent of workers traveling to Germany, the second most popular country. But last year, Germany pulled even with Britain, with both garnering 14.6 percent of all EU digital nomads, while France — championed by its president, Emmanuel Macron — has done all that it can to knock the U.K. off its perch as the region's top digital ecosystem.

It's not just talent that may be drying up. A recent survey by KPMG and IHS Markit, two consultancies, shows that economic output from the U.K.'s tech sector had begun to slow, though it's still expanding each quarter at a faster rate than other sectors, and wages to attract and hold onto talent have skyrocketed, hurting businesses' overall bottom lines.

For Giles Derrington, associate director of policy at TechUK, a local trade body whose members include global giants like Google and Apple, as well as U.K. players like chip designer ARM Holdings and Sage, the digital accountancy provider, this uncertainty is making it harder for companies to justify future investment in Britain — particularly when the chances of a no-deal Brexit are on the rise.

"The U.K. has always been an obvious center for investment into the EU," he said. "Now, that's a lot harder case to make for businesses. They don't have a clear sense of what the rule of law will look like in the U.K. for the foreseeable future."

Mark Scott is chief technology correspondent at POLITICO.

This article is from POLITICO Pro: POLITICO’s premium policy service. To discover why thousands of professionals rely on Pro every day, email pro@politico.eu for a complimentary trial.