Robin Campbell-Burt – Director at Spreckley

In early 2016, the consultancy group, EY, published a report that ranked Britain as the top location in the world for Fintech. However, this preeminent position as a Fintech hub was brought into question just a few months later with the vote to leave the European Union. The Brexit vote made many people question a whole range of previously held certainties about the economy. The truth is that no country has ever left the European Union before, so nobody knows for sure what impact leaving will have. So it is worth going back to basics to consider what made the UK – and London in particular – the world-beating focus for Fintech in the first place.

Firstly, London, along with New York, is the centre of the world when it comes to financial services, with the two cities regularly topping league tables. So there is – at the moment – a strong foundation for Fintech innovation. With this in mind, will the Brexit vote break up the financial services sector with many businesses moving to mainland Europe?

While the nature of the relationship between London and the EU is expected to change, and some financial activity may move into one or more of the remaining EU members, it is interesting that most senior banking executives expect London to maintain its position as a global financial centre. A major reason for this is the complex ecosystem of expertise that has grown to underpin the City of London. It isn’t just banks and insurance companies, but also all of the businesses that they rely on as well as a highly skilled workforce. This can’t just be re-created anywhere else in Europe overnight, and certainly not to the same scale. Having a strong financial sector is essential to a strong Fintech industry. So while some financial services may move to the continent, London will still likely carry a lot of weight in the years to come.

The UK is ideally placed geographically and has a time zone that bridges the US and Pacific. In a more global world, being able to connect easily with the major markets internationally is valuable to many. This has been an important factor when comparing the UK to other growing Fintech hubs such as Singapore, California, Australia and China.

There is also a highly entrepreneurial culture in the UK, with typically less regulation and greater government backing than in many other European countries. The Financial Conduct Authority has developed specific programmes to support Fintech including its own sandbox in order for Fintech businesses to test innovations in a safe way. Such openness and dialogue between enterprise and regulator has helped to build trust and experimentation in Fintech development.

Another factor to consider is how advanced UK consumers are in their adoption of technology. Globally, they are some of earliest adopters when it comes to technology, and there are big advantages to launching new innovations in the most receptive markets possible.

The UK has a mature and innovative technology sector, which feeds into the more specific area of Fintech, easily transferring skills and innovative ideas, providing a critical mass not possible in other locations. TechUK has just published a report into the impact of Brexit on the digital economy and it makes for very interesting reading. Two of their findings stand out in particular for me:

Firstly, the report suggests that non-tariff barriers will likely be the most significant issue for the UK tech industry, specifically data protection regulations and the impact of the UK becoming a ‘third country’ on businesses’ ability to transfer data across borders with the EU.

Secondly, is access to a skilled workforce. The report states that of the three million workers employed in the digital sector, 18.4 per cent are foreign-born. About a third of these come from EU countries. If the available skilled workforce in the UK dries up, then this will impact growth of innovative ideas. The Prime Minister has announced that the UK will leave the single market when it leaves the European Union. This means that the comprehensive free trade agreement now being sort with the EU will need to address these two issues.

There is undoubtedly a large amount of uncertainty as to the impact of Brexit on financial services, the tech sector, and Fintech in particular. What will be key to the future of Fintech will be the scale of any movement of the financial services industry from London to other cities, and the ability of the UK to establish an ‘equivalence’ agreement on data regulations with the EU.

As long as the fundamentals of what has made the UK the leading Fintech hub in the world remain, then there is every reason to expect Fintech to have a bright future in the UK. We should all be following the discussions on developing a comprehensive free trade agreement with keen interest in the months and years ahead.