A £1bn growth fund, changes to visas and new listing regulations are among the recommendations to grow the UK fintech sector.
The UK has long dominated Europe’s fintech arena but the sector needs to re-strategise for the future after Brexit and coronavirus recovery.
That’s according to an independent review backed by the British government into the burgeoning sector.
Led by former Worldpay chief executive Ron Kalifa, the report found that the UK accounts for 10pc of the global fintech market and the sector is worth more than $11bn to the UK economy every year. But Kalifa made a number of recommendations for how the UK can maintain its fintech lead, especially in a post-Brexit landscape.
‘We must continue to nurture our start-up culture, but crucially we must also give our high-growth firms the support to become global giants’
– RON KALIFA
He said the government should create a £1bn growth fund to invest in British fintech start-ups. A ‘fintech scale up’ visa was also recommended to ease the process of bringing international talent to the UK to work in fintech.
Regulation is a hefty cost of doing business in fintech and the report recommended the introduction of a ‘scale box’ for companies to test new products under regulatory supervision, which is similar to the sandbox programme currently run by the Financial Conduct Authority.
Kalifa said the UK should loosen up rules for stock market listings to encourage more companies to go public. He also suggested reducing free float requirements – the minimum number of shares made available to the public – from 25pc to 10pc, and expanding R&D tax cuts for the sector and opening up tax incentives for investors in regulated sectors.
“We must continue to nurture our start-up culture, but crucially we must also give our high-growth firms the support to become global giants,” he said.
In relation to Brexit, the fact that the EU-UK trade deal doesn’t factor in financial services poses a risk to the fintech sector.
The clearest example of this is how financial services and fintech companies have been shifting their approach to licensing. Brexit created two separate markets – the EU and the UK – requiring many companies to be set up on a regulatory footing in both regions.
Kalifa recommended revising an international fintech action plan to foster better ties with other ecosystems, such as making it easier to access information on local regulations and grants and support schemes. These efforts should “align to priority trade agreements including US, Singapore, Australia, Middle East, Africa as well as Europe,” the report said.
The past year or so has seen some larger European fintech players exit the UK market, including N26 and Holvi, as a result of Brexit. The recommendations made in the report seek to create a mix of domestic and international companies in the country’s fintech sector.
The report also highlighted efforts that should be made in other regions of the UK. The country’s fintech pedigree includes big names with big VC backing including Revolut, Monzo, Checkout and Starling, while the scene sees newcomers regularly emerging for a piece of the pie.
However these companies are centred heavily in London. Kalifa’s report suggested greater emphasis be placed on “clusters” and has identified nine cities and regions outside of London that should be supported and grown. These include Birmingham, Manchester, Leeds, Northern Ireland and Scotland.
Clusters, the report said, “though smaller than their established counterparts, show great potential to grow or already feature a specialist fintech focus”.