June 26, 2018
Brexit and the Future of British Fintech
As we approach the second anniversary of the Brexit vote, British International Trade Secretary, Dr. Liam Fox announced the start of the UK’s fintech initiative.
Forbes reported Prime Minister Theresa May touts the sector will add over 1,600 new jobs to the British economy and an additional 2.3 billion GBP in investment. Fox says the country already received 1.8 billion GBP in fintech investment in 2017 which represents a 153% increase over-investment in 2016. Fifty-four percent of that investment came from non-domiciled VC firms.
The fintech industry globally is experiencing a meteoric rise in investment. According to KPMG, fintech investment reached over $8.7 billion in Q4 of 2017. In the case of the UK, how does Brexit impact fintech investment?
Brexit created waves of uncertainty for nearly all industries operating in Europe. Many predicted a mass exodus of everything from manufacturing to banking. However, despite its separation from the EU, London will remain a global center of gravity in finance. In 2017 following the vote, Deutsche Bank committed to opening a new office in London only strengthening its ties with the UK.
By the same token, investment banks like Goldman Sachs say they will shift presence toward the EU and away from the UK thus further exacerbating the uncertainty of it all. The lack of action indicates fintech firms won’t know the full impact of Brexit for several months or even years after completion.
As an industry, we shouldn’t worry so much as to whether fintech more investment will allocate to the UK versus Germany or France but rather look at European innovation as a whole.
The UK falls in third place for global fintech investment behind the US and China. With the government placing a concerted effort on spurring fintech growth, investment will likely keep growing at a healthy pace.
Retaining the European Workforce
However, there are rising concerns over retaining industry talent in the UK. According to Forbes, over 30% of fintech workers in the UK come from other European countries. With Brexit, European workers won’t be able to move as freely between their home countries and the UK.
Forbes concludes that healthy investment coupled with hospitable business regulations will allow the UK to maintain its leadership in European fintech innovation despite Brexit controversies and uncertainties.