Hopes of detailed spending plans for fintech were dashed when Chancellor Rishi Sunak failed to specifically mention the sector in his Budget speech on March 3.
Luke Hamm, CEO of R&D tax specialists GovGrant said in a statement that the government had “fallen short” of expectations.
“Fintech is one of the crucial sectors for the UK’s economic recovery from coronavirus and Brexit. The Kalifa Review has highlighted this fact, and yet today’s Budget has offered nothing to further investment in the sector,” he said.
Jed Rose, general manager of EMEA at fintech Airwallex, agreed and said in a statement: “We feel that today’s Budget should have had an even greater focus on its fintech initiatives.”
With the publication of the Kalifa Review of UK Fintech on February 26, there was anticipation ahead of the Budget to see if the Chancellor would provide a plan for how the government intends to implement the review’s recommendations. Instead, the sector must wait for further news on how the government intends to proceed.
Rose urged the government to act quickly and develop a “unified strategy for the fintech community” to appeal to fast growth companies.
“At a time when Brexit and Covid-19 have drastically altered the business landscape, the UK does not want to lose its position in the market. Fintech should continue to be a driving force for the UK by creating a global hub of quality jobs and financial inclusion,” he said.
Fast-track visas welcomed
Christian Nentwich, CEO of fintech Duco, believes the sector is already facing an uphill struggle dealing with the fallout from Brexit, so was relieved to see that issues around access to talent were addressed in the Budget through the fast-track visa scheme for highly skilled migrants.
“We have to repair some of the damage from Brexit. We just lost access to a huge talent pool where we just bring people in from Europe, so these visas that were announced looked very promising,” Nentwich says.
For companies like Duco that were scaling quickly, the current visa rules make hiring the best talent from abroad “very hard” as they can’t afford to wait up to four months for overseas hires to arrive, Nentwich says.
Sue Kakadia, head of immigration at accountancy firm Mazars, said in a statement that the fast-track visas would be especially welcomed in the fintech space.
“The UK has a 10 percent share of the global fintech market and attracts more fintech investment than the next four European countries combined. Around 42 percent of the UK’s 76,500 fintech workers come from overseas, and the new visa rules aim to consolidate and build upon the UK’s strong position in the market,” she said.
Fears over capital gains tax
Nentwich was concerned in the run-up to the Budget that capital gains tax could be hiked to be more in line with income tax as the Chancellor sought to begin paying off some of the £407bn in borrowing caused by the pandemic. However, it has been left frozen for the time being along with income tax.
“Raising it all the way to income tax levels could have choked off investments completely,” says Nentwich. “I think we have to be very careful.”
The freeze on capital gains tax has not stopped speculation over an eventual rise, particularly after the Chancellor’s stated desire to eventually balance the books in a similar vein to David Cameron’s administration’s austerity push after the global financial crisis.
Nentwich still expects a capital gains tax rise at some point in the near future but hopes it will be “considered” and avoid mirroring income tax – a move he says would be “disastrous”.