BREXIT BLUES - Uncertainty leaves doubts about UK fintech future
Simon Hardie, Partner at MagnaCarta, says results from the Fintech Disruptors 2019 study confirm the fintech sector’s confusion and uncertainty about Brexit – with several firms taking concrete steps to relocate their operations to continental Europe as Britain’s departure from the EU looms.
We’re now just two months away from Britain’s planned departure from the European Union on 29th of March. The reality is that the games being played in Westminster and Brussels between politicians look like a circus compared to the real economic damage Brexit risks to one of the UK’s most productive and creative sectors – new financial technologies, or fintech.
First of all, let’s be clear that fintech is one of the sectors on which the UK stakes its international reputation as an innovative, world-leading economy. We are not talking about a few artisanal jam-makers deciding it would be nicer to live in Amsterdam: we’re talking about young and growing companies in a world-beating sector that are deciding to leave. Britain has led the world with concepts like a regulatory sandbox for fintech, and the Open Banking initiative designed to lead to more competition between financial firms. This open, positive approach has created a sector that employs nearly two million people and, according to Forbes magazine, could be worth up to 10% of UK GDP.
The Fintech Disruptors series polls more than 2,000 professionals across Europe, the Middle East and Africa annually, as well as twenty senior fintech executives from across EMEA. This year, we found a big spike in the numbers of professionals saying Brexit is going to harm the UK economy. Nearly half (49%) of those we spoke to said their firm would consider blocking or delaying investment in the UK as a result of Brexit, up from 31% last year; and 58% of those polled said they believed Brexit would lead to accelerated growth in other European fintech hubs.
These are big numbers by themselves: when you consider these are the largest margins we’ve seen against Brexit in the three years since we started tracking the issue, they take on more significance. It’s clear that it’s not just the idea of Brexit which is creating uncertainty – it’s the muddled way it’s been handled which is making fintech nervous, and leaving doubts about the UK’s future.
What’s more, these numbers are just part of the story – in addition to well-publicised moves by Japanese banks like Nomura and MUFG moving parts of their business and their HQs to Amsterdam, we’re also seeing fintechs like TransferWise now openly discussing the possibility of moving. Although the contents of our senior executive interviews are confidential, we also know from our personal engagement with many companies in the sector that more firms are making plans to leave the UK in the next year to eighteen months.
Those seeking to dismiss these findings might point to another figure from this year’s report which shows a 3% increase in the number of those who think London will grow as a fintech hub. However, this is not a statistically significant increase, in our view – and it pales in comparison with those who now believe the US is going to lead the way, with a 12% increase in those expressing long-term confidence in America. To say nothing of growth in China’s standing as a global fintech hub.
Until recently, it looked as though the UK – and London in particular – was going to lead the world in one of the twenty-first century’s most significant industries. Now a combination of prevarication, muddle and lack of clarity appear to be jeopardising the UK’s best chances of success in a sector where it has traditionally led the world as an innovator.
The Fintech Disruptors series tracks opinion from fintech executives around the world about current trends and future prospects in the sector. To download a copy of the latest survey go to: www.fintechdisruptors.org