The result of Britain’s EU referendum shocked many in the business community. It has left the country with a caretaker government, an opposition in disarray, and no clear roadmap for a post-Brexit UK.
In March, we surveyed our startup members on Brexit and found that 80 per cent supported Remain. This was consistent with many surveys from the business community and the position taken by both the City of London and the new London mayor. But 52 per cent of people in the UK voted to leave the EU. We must respect this and move forward. It is now time to start filling the vacuum left by our unpreparedness for the outcome of the vote, and start the work of securing our new future in Europe.
Innovate Finance spent last week listening to the government, our community, and the global fintech ecosystem. We also surveyed our 250 fintech startup members and financial institutions to discover their priorities for fintech in a post-Brexit UK.
The number one priority is clear: we must retain access to the Single Market, financial services “passporting”, and to fintech talent. On top of this, we must do everything we can to continue to attract investment and liquidity, the lifeblood of a startup, especially in its earlier stages.
London is the undisputed number one financial services centre globally, and the number one fintech hub in the world. With tenacious and energetic representation and negotiations, we can keep this position, and that is our message to government and the global community.
Not all of our fintech membership will be impacted by Brexit. Domestic UK plays like peer-to-peer lending, crowdfunding, and challenger banks are largely unaffected, and there will be little impact on global money transfer and domestic personal financial services fintech firms.
But the impact becomes more apparent as firms grow their businesses outside of the UK into Europe to access the much larger Single Market of over 500m consumers, businesses, and capital markets. Fifty per cent of our member firms are currently authorised to “passport” into Europe.
While the fintech community appreciates a new government will need to interpret the vote of the people into a Brexit roadmap, the probability of any government taking the UK out of the Single Market appears lower than higher at this juncture.
So let us begin the Brexit negotiations on a positive note. Given our almost 50/50 goods export and import trade relationship with Europe, and over 40 years of financial services integration and harmonisation, it is in our mutual interests to expedite this to everyone’s benefit.
Though investment slows in times of uncertainty, the signs of recovery in stock markets and the business community’s unity around not relinquishing access to the Single Market is starting to rebuild lost confidence.
Venture investors are committed to UK fintech and will continue to support their portfolio companies while assessing the post-Brexit landscape, as will corporate venture capital funds and financial institutions, all of which have invested heavily in fintech over the last year.
But in fintech, both capital and talent are global and are the two key ingredients of success. Over 30 per cent of our founders and chief executives are not from the UK. Britain must continue to secure access to global STEM talent for fintech’s continued success.
Financial institutions are keeping a cautious eye on developments but no one is moving anywhere quickly. While European banks are more sanguine than their UK counterparts, most top tier UK banks have global networks and will not react hastily one way or another. This is even more true for US top tier banks, as they will “passport” in any European country they chose to. Fintech has become an enabler for financial institutions seeking to transform their customer propositions and heritage technologies through digital innovation – and this is not going to stop.
Ultimately, Britain’s fintech sector must remember its inherent strengths. Thanks to the FCA, Project Innovate, the Regulatory Sandbox, and the upcoming Industry Sandbox blueprint, the UK is still the number one fintech hub on the planet to accelerate your route to market in the UK and in Europe.