United Kingdom

Will Brexit impact London FinTechs?

FinTech is pioneering innovation in a fast-evolving, competitive market where start-ups now rival established brands.

The City of London has a long standing financial services industry, as well as an established legal infrastructure, excellent talent pool, great supply of varied culture and access to investment. With the financial district physically situated alongside the technology sector, it is the natural home for this fledgling industry.

And what a welcome it has received. In 2017 over USD 800 million was invested in London-based start-ups, doubling the previous year’s pot. In March last year the UK Government unveiled its first FinTech strategy, which included a GBP 7.5 billion public private investment fund.

The jewel in London’s crown is its electronic trading infrastructure, which processes over half of the world’s USD 5.3 trillion currency market. Its advantageous time zone between US and Asia also adds to its kudos.

These convincing circumstances will likely see it remain at the forefront of the European and global FinTech industry, in the short term at least.

Yet the UK now faces the most serious challenge to its status as the FinTech hub of Europe. Although it is too early to draw any definitive conclusions on the impact Brexit will have, many FinTechs are quite rightly assessing the implications to capital raising, talent acquisition and retention.

By their nature, FinTechs tend to rely on fast developing technologies to maintain competitor advantage, so need to move quickly and access talent across borders.

Currently London remains an attractive destination for talent with a dense cluster of financial institutions. However, this could wane amid the long-term Brexit uncertainty and the increasing competition from elsewhere.

George Osborne reiterated this recently by saying the UK will remain a European hub, but only if the economy remains open and immigration is not blocked. After all, the strength of London’s FinTech sector is at least partially reliant on its diverse workforce.

Uncertainty over passporting and access to talent could lead FinTechs that would have started up in the UK to choose locations such as Dublin or Brussels instead. It has been reported that over 100 FinTech companies are in talks to move their headquarters to Berlin. Tallinn, Lisbon and Sofia are also being touted as thriving economies for start-ups. In other words, the vultures are circling.

If you would like to discuss anything discussed in this article further, please get in contact with Jack Hammond.

Jack Hammond

Jack Hammond
FinTech Specialist
Aon