The preaviling narrative in the UK is that the Europeans were deeply disappointed by the 2016 Brexit referendum result, and have been imploring Britain to think again.
And, indeed, some have.
But, just like British Leave voters in 2016, many Europeans regard Brexit as a unique opportunity for their own countries.
Over recent months, I have heard countless stories about approaches to London-based businesses from the French, Irish and Germans, based on the idea that the UK’s departure from the EU will make London less economically vibrant and viable.
Until recently, it felt as though this was also the UK government’s view, as our politicians treated Brexit as a problem to solve rather than an opportunity to seize.
But if we are to make the most of Brexit, whenever it might be delivered, we must be more self-confident about our underlying strengths and our future potential – and much more assertive in protecting and enhancing that which we are already good at.
There are few sectors more in need of this backing than fintech. The UK’s fintech offering is a global success story, with London the undisputed centre of activity and considered by many – including Deloitte and EY – to be the world’s fintech capital.
Underpinned by its status as Europe’s leading finance hub, more than 1,200 fintech firms are based here, employing tens of thousands of people and attracting more than £2bn of investment in 2018.
Alongside London’s standing as a global financial services centre, fintech thrives here because of the deep and varied pools of capital which exist, and the talent currently available to ambitious firms.
But there are doubts at the moment over both of these advantages.
When recently surveyed about their concerns by the Digital Finance Forum, two thirds of fintech founders said that access to talent was their biggest concern for the future, partly as a result of changes to immigration policy post-Brexit, while many others pointed to a potential lack of growth capital in coming years.
It is precisely these sorts of fears that international rivals have been trying to stoke when making their overtures to UK fintech companies. This is a battle that London cannot afford to lose.
In Herding Unicorns, a report I co-authored with colleagues at the Centre for Policy Studies, we put forward a number of recommendations for how we could ensure that tech firms here have access to the talent they need, including a new class of special visas – with qualifying companies able to issue their own Certificates of Sponsorship – and measures to improve the flow of UK citizens with the digital skills required, potentially overseen by a new Digital Sector Skills Council.
It also contained ideas to increase the quantity and quality of capital available to firms, advocating changes to the Enterprise Investment Scheme and Seed Enterprise Investment Scheme and an extension of the range of investments permissible within Isas, as well as proposing new measures to attract more institutional investment, particularly into later-stage financing.
Implementing these sorts of ideas is crucial if the UK is to remain a global fintech hub. It does, however, require much more support for fintech from both the Treasury and fintech’s regulator, the Financial Conduct Authority (FCA).
To foster and support innovation within fintech, the FCA operates a sandbox, providing a safe and accelerated pathway for firms to get into the regulatory environment and to show their business model works. Many who have operated within the sandbox have praised the role it has played in helping them succeed.
Nevertheless, fewer than half the industry players recently surveyed by the FCA said that the regulator is effective at facilitating innovation. At a time when the provision of financial services is rapidly evolving, with new technologies disrupting traditional business practices, the FCA must work harder to support the fintech sector and to promote innovation if the UK is to stay on top.
First, the FCA could have fostering innovation as an operational objective. Regulators are driven by their duties and objectives – yet the body overseeing fintech does not have innovation as one of its guiding principles.
Second, it could broker international agreements so that operating within its sandbox allows firms access to other jurisdictions. If the FCA thinks a company can operate within the UK, it should support its development into other markets.
Finally, the FCA could work with other regulators, allowing cross-sector ideas to emerge and come to market. Regulators often operate discretely, making it hard for firms to navigate the plethora of regulatory obstacles which exist.
If adopted, these ideas could help London retain its position as the world’s fintech capital. The sector would continue to create jobs, wealth and opportunities within the UK, and we would stave off the best efforts of Emmanuel Macron and the Parisian authorities.
But if the FCA and the government fail to protect this jewel in the UK’s financial services crown, we will all be poorer as a result.
Main image credit: Getty