Recommendations from the government-commissioned Kalifa review published today have been broadly welcomed by the fintech industry.
The UK has been at the forefront of innovation in recent years – the sector is worth an estimated £11bn in revenue and represents 10 per cent of the global market.
But the report, led by former Worldpay boss Ron Kalifa, warns the UK’s position as a fintech hub is at risk from growing competition and uncertainty caused by Brexit.
The proposed tech worker visa has been widely welcomed by the industry to combat fears Brexit will deter the top talent from moving to the UK.
“From new stock market listing proposals, to investment in digital skills and new visa schemes – this report is a clear testament of the Government’s commitment to bolster fintech innovation,” Russ Shaw, founder of Tech London Advocates said.
Agile tech visa scheme is ‘invaluable step’
The Kalifa report calls for a new tech worker visa which the industry has been lobbying for since the 2016 Brexit referendum.
“Brexit gives Paris, Berlin and other European fintech hubs a window to capitalise on uncertain messaging. In order to sustain its global dominance in fintech, the UK needs to strengthen its position on immigration or risk a significant shortage in human capital,” the report said.
The government’s new immigration system may have been widely praised but fintech firms now need to navigate the system for EU talent for the first time in decades. The report states foreign workers represent 42 per cent of UK fintech employees with EU workers making up 28 per cent of this group.
“At present, hiring the best talent can be a costly and timing consuming process, so any additional simplification and cost reduction is enormously welcome. Similarly, improving access to a much deeper pool of talented engineers is also welcome,” Charles Delingpole, founder and chief executive of ComplyAdvantage said.
For Dr Lewis Liu, chief executive of Eigen Technologies, the tech visa is essential for the UK to keep its competitive advantage. ““As a Chinese American, I had the chance to found Eigen in either of the two places best known for tech unicorns: America and China. I choose pre-Brexit London because it was the most international city in the world,” he said.
“In order for the UK to keep its competitive advantage against the other top tech markets we have to have a visa regime that allows people like me and those who make up Eigen to come to the UK to build the next generation of FinTechs.”
Dual-class share structures a ‘storm in a teacup’
Ahead of a separate review into London listing rules led by Lord Hill, the report sets out recommendations to encourage fintechs to list in London.
There are encouraging signs that activity in London’s IPO market is picking up. But of the 3,787 IPOs at the world’s major stock exchanges between 2015 and 2020, the US accounted for 39 per cent (on Nasdaq and the NYSE), while the UK trailed with 4.5 per cent.
Kalifa has called for free float requirements on the stock exchange’s Premium segment to be reduced from 25 per cent to 10 per cent for a limited time post-IPO.
Al Lukies, a strategic advisor and part of the review’s governance process, said dropping the free float amount “will encourage startups to list in London, ensuring that the LSE continues to be the most active stock exchange in Europe.”
Kalifa also suggests dual-class share structures would allow founders maintain greater control of their companies after listing.
Delingpole calls this recommendation “a bit of a storm in a teacup” instead calling for more focus on the ‘change of control’ rules “which are a prohibitive force when it comes to going public”.
These rules make it harder for special-acquisition vehicles (Spacs) which have seen a boom in popularity in the US, to list in the UK.
The blank-cheque vehicles are created to raise capital through a public listing with the purpose of acquiring an existing company. Once the target is bought, that business takes over the listing and begins life as a public company.
When a reverse takeover happens in the UK trading is automatically suspended. “This is a very real prohibitive factor when it comes to listing companies in the UK, and needs to change,” Delingpole said.
“We’re second only to the US when it comes to fintech investment and this review will only strengthen our position in encouraging businesses from across the globe to flock to the UK,” Tom Shave, partner and head of fintechs at Smith & Williamson said.