A new Ernst and Young report has found that fintech helped boost foreign direct investment (FDI) to its highest level since 2006 and this is set to increase with the growing demand from foreign investors to enter the UK financial industry. However, as the EU referendum approaches, the impact that it is predicted to have on tech startups could mean that this could change.
With 94 FDI projects in the UK financial sector generating 8,138 jobs last year, this resulted in the UK representing a third of all European financial services FDI, according to CityAM. 73% of the investors surveyed by EY believed that it was a strong driver for heightened investment into the UK market, alongside this, 43% said that banking, insurance and wealth management are attractive industries.
“This is the highest market share in FDI that the UK has seen for a decade, which should cheer the UK financial services industry, the Treasury and the wider business community. Investors are optimistic about the UK’s strong domestic market, our commitment to maintaining an environment where businesses can grow and develop, and our burgeoning fintech industry,” EY UK financial services leader Omar Ali said.
CityAM also reported that some respondents were not confident about the future of the UK financial sector and 27% of those asked believed that the UK would not be as attractive to investors in the next three years. The news report also had comments on the EY survey from both Britain Stronger In Europe and Vote Leave campaigns.
“Pro-EU advocates have been unable to present a positive vision of Britain remaining in the EU so have run a campaign of doing down Britain’s economic prospects. The dynamism of the British economy is exceeding the doom-laden predictions of the remain camp,” Matthew Elliott, chief executive of Vote Leave said.
In responses to this, executive director of Britain Stronger In Europe, Will Straw said that “this latest study clearly shows that Britain’s economy is stronger in the EU while leaving will put this crucial investment at risk. Nine out of 10 economists say leaving Europe and the single market will cost investment, cost jobs and damage our economic future.”
In addition to this, new research from StartUp Britain has revealed that over 90,000 startups were formed at the beginning of this year, despite the uncertainty surrounding the upcoming EU Referendum. This number is expected to grow across the UK and break records by reaching 608,110 by the end of 2016.
Director of the national entrepreneurship campaign, Matt Smith, highlighted that this is a reason to remain optimistic about the startup ecosystem in London. “Entrepreneurship is a personal endeavour by people who are passionate about turning ideas into action, so it is unsurprising that business formation levels continue to rise despite any future uncertainties.”
Many big financial players over the past few months have stated that a Brexit would not be beneficial for fintech and financial stability, as Bank of England governor Mark Carney described. “The industry is worried London will lost momentum and its reputation for innovation if Britain has to renegotiate its trading relationship with the EU or deal with economic fallout from an “Out” vote,” Reuters reported.
Rajesh Agrawal, founder and CEO of Xendpay, highlighted that an exit from the EU would mean that the free movement of capital would be put at risk and it would be senseless to cut ourselves off from the London’s 500 million customers that are on the other side of the channel. “Leaving the EU would put the fintech industry – that contributes so greatly to our economy with an annual value of over £20 billion and counting – at great risk at a time when the world flocks to our nation to have a slice of the fintech pie.”
On the other hand, fintech influencer Chris Gledhill, CEO and co-founder of Secco Bank, believes that this decision should be viewed as a second chance. “I believe it is time we started treating a Brexit as an opportunity, not just for UK fintech but for the UK as a whole. It’s like a choice myself and a good few people in the London Fintech scene have made – do you continue working for a large incumbent organisation or quit and join a startup. Well I believe it’s time the UK started acting more like a startup and less like an employee of Europe,” Gledhill said.