Can fintech thrive outside of London? Charlotte Crosswell talks growing the sector around the country
Even as Charlotte Crosswell launched the Centre for Finance, Innovation and Technology in Leeds this week with a mandate to boost fintech across the UK, those in attendance were asking why it couldn’t have been in London.
The Leeds event had big name backers in City minister Andrew Griffith and has full-throated support from across government and the industry. But however tongue-in-cheek those questions may have been, they now point to the challenge ahead for CFIT and its chair, the former open banking and Innovate Finance chief Crosswell.
CFIT was outlined as the key delivery measure in the landmark Kalifa review of fintech in 2021, and was described by Ron Kalifa as “the outstanding piece of the jigsaw” to deliver a coherent national strategy for the sector when it was given £5.5m seed funding by the Treasury in 2021.
But fintech’s success has become synonymous with the Capital. And, naturally, the talent and money that keeps the sector moving have followed. The role of Crosswell and CFIT’s new chief exec Ezechi Britton is now be to ensure the spread of the sector becomes “more balanced”.
“If we do our role well, by having the spotlight and the input and output coming in from those regions, [talent and investment] will be a natural evolution,” she tells City A.M. in an interview. “We’re not there to promote [areas outside of London], that’s not our role. We’re there to solve the difficult challenges.”
She says the aim of the new body will not be to draw the existing sector away from the capital but to establish cities like Manchester, Belfast and Bristol as thriving fintech ecosystems in their own right. As you would expect with a challenge of that size, it is likely to be easier said than done.
London calling
Fintech has undoubtedly been a UK success story of the past ten years. Regulators and politicians moved fast in the wake of the financial crisis and rolled out smart reforms that have spawned an ecosystem and been adopted the world over.
But it is an industry that has clustered tightly around London. If London was a country, it would have been surpassed by only the US last year in terms of capital invested in fintech, while employers had 350,000 software developers to choose from in the capital in 2019, more than any other European city.
And while Crosswell says the advent of remote working should in theory have helped ease the tight collection, London’s dominance remains.
“During COVID everyone managed to [invest] virtually and I think everyone thought we had finally broken the back of it – you don’t have to be headquartered in London to get capital,” she says.
“Somebody once called it “the £200 cup of coffee” – you come down from Manchester to London to be told ‘no’. But we seem to have gone back to that again.”
The figures bear that out. London accounted for two-thirds of all the venture capital investment into the UK with over £16.4bn raised across sectors last year, whilst deal value into the UK regions fell by £3bn to £6.2bn, according to KPMG.
Crosswell says that there is a words-rather-than-action problem among investors who say they are keen to expand the geography of their portfolio but rarely deliver.
“[Investors say] I really want to have a regional portfolio, but perhaps they’re not going out to proactively find it much,” she says. “When I saw the investment numbers for last year, they are still very skewed towards capital. And I think if we look at the profile of all the fintechs across the UK, that’s not quite mapping out to where the potential fintechs are.”
Regulators are looking to lead by example and are spreading their footprints beyond the City. The FCA opened a Leeds office in September with 100 new staff, and the Bank of England has previously eyed a migration of its staff to the city.
CFIT has also rolled out a host of new partnerships with universities around the country to try and boost the flow of talent into fintechs outside of London, which she says could begin yielding results in the next year.
But Crosswell says there is still a huge amount of work to be done, and the pull of London is – for the moment – inescapable.
“Any fintech I’m talking to, of any size, is probably in the capital once a week at least. And that’s even with the advent of home working. It probably used to be two or three days, so I think we’re getting there slowly,” she says.
Falling behind?
More existential than the inter-region troubles, however, is that the UK’s crown could be slipping. France is ramping up efforts to win Paris the title of European fintech hub, and progress in areas where the UK was fast moving like open banking are being overtaken.
While the UK shaped frameworks for fintech regulation and innovation, other markets are now just cherry-picking the best bits, she says.
“We put together the whole playbook for fintech for international hubs, and then they come in and say ‘Great, someone’s done all the hard work. [The UK] has learned from the mistakes. What’s working? We’ll take that.’”
And that is why the question is less a split between UK and the regions, and more about national growth and ensuring the UK stays competitive internationally, she argues.
“We need to make sure that we’re not resting on our laurels and we are taking it forward and solving those problems and accelerating the adoption of fintech,” she says. “That is what is needed to further boost the sector.”
Rather than a battle between the Capital and the rest, she argues that the growth of the sector will lift all. Now it’s on CFIT and Crosswell to help drive it.