Technology First Look

Why Snapchat picked London for its new headquarters, Brexit and all

More tech firms seem to be gravitating toward London, despite Brexit.

A view of the central London skyline with the St Paul's Cathedral as seen from the south bank of the River Thames.
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Snap, the parent company of picture messaging service Snapchat, will anchor its international headquarters in London, a move that dismisses fears of the UK’s departure from the European Union and possible shakeup the financial sector.

While several tech companies seeking to capitalize on low tax rates have chosen Ireland or Luxembourg for their international headquarters, a few have ramped up their investments in London, seeing value in the city’s booming creative hub. That’s good news for British leaders and workers, who have faced a future of financial uncertainty since the country voted to leave the EU in the controversial “Brexit” vote last June.

It is expected that 2017 will be a record year for Snap, which plans to go public after four years of developing and expanding its operations. The company has noted that the growing creative and tech centers in London could prove helpful to boosting their international efforts.

"We believe in the UK creative industries,” Claire Valoti, general manager of Snap Group in the UK, said. “The UK is where our advertising clients are, where more than 10 million daily Snapchatters are, and where we've already begun to hire talent."

Snapchat, which was first released in 2012, has grown from a instant picture messaging service to an expanded social media operation, allowing users to not only communicate with one another but also to engage with news stories and advertising. It has become increasingly popular with middle- and high-school aged teens, who often opt to use the service over its more established competitors like Twitter and Facebook.

The UK headquarters will be responsible for recording both sales made in the UK and to clients outside of the US where the company has not set up a sales force.

The company already has a small staff of about 75 people in its London office, but plans to expand its base. Google, Amazon, and Facebook have all increased their investment in the area as well, with Google planning to hire 3,000 additional employees and Facebook amping up its efforts by 50 percent.

The trend brings some solace to post-Brexit London, which has proved its skilled workforce, booming advertising industry, and relatively low tax rates can still attract firms and talent in a time when markets have been disrupted by the vote. Some even speculate that EU crack downs on lower tax rates in Ireland and Luxembourg could push more companies to explore expansion options in the UK following its EU departure.

While Snapchat boasts 150 million daily users worldwide and a valuation of some $20 billion, it has yet to turn a profit, and may not be too concerned thus far about a slightly higher tax rate in London. That is expected to change in 2017, with the company forecasting revenue of as much as $1 billion. While that falls significantly behind that of Snapchat’s peer tech companies, the messaging service is growing in users at a rate some eight times that of its competitors, with 50 million of its users hailing from Europe.

This report contains material from Reuters.