Brexit means Brexit, as it has been said, and for fintech firms, that means a significant reduction in funding since the referendum in June.
Britain has seen 30 fintech start-ups have their funding pulled, a significant event that has left many questioning the long-term validity of Britain remaining Europe’s fintech central hub. According to the FT, independent fintech membership association Innovate Finance has reported that 30 out of 250 firms, many still in their infancy, needed to make calls overseas in a bid for emergency injections of funds.
Globally, fintech investment is still up by some 27 per cent, but in the UK, fintech investment fell by some 25 per cent, down to £427m ($533m). The industry was expecting dramatic growth rates of 50 to 100 per cent, a target that was well off the mark.
This is seen as a blow to Theresa May’s government, which views competition between traditional high street banks and fintech firms as a boon for the financial industry. Since the British public voted to leave the EU in June, analysts have wondered about the long-term future of the banking and finance industries in the UK, while executives stationed in Canary Wharf have reportedly pondered moves to the continent. This news is not likely to ease any of the fears of industry leaders.
Following Brexit, Innovate Finance was contacted by firms who immediately recognised the precarious position in which the vote left their respective futures. Lawrence Wintermeyer, head of Innovate Finance, has reported that in private, his members have bemoaned the possibility that firms will no longer have access to either the single market or to Europe’s fintech talent pool. Some 30 per cent of Innovate Finance’s membership firms are headed by non-British nationals.
“We set up a post-Brexit toolkit, which is almost a first-aid kit, trying to align them with other venture capital and private equity investors. It was an obvious response for us to what seemed like a crisis,” Wintermeyer said to the FT.
With cities across Europe making overtures to UK firms following Brexit, and now with the deleterious funding revelations, it may be tempting for fintech firms to go head to Berlin or Frankfurt or the countless other cities that would count themselves fortunate to host them. Why stay in the UK? Simon Kirby MP, economic secretary to the Treasury, still thinks London is as appealing a location for fintech organisations as it has ever been, arguing its geographic location and regulatory system sets the UK apart. He is also confident that the government will get a satisfactory deal in its Brexit negotiations.
“We are listening very carefully to fintech businesses’ concerns about access to capital, access to high-skilled labour and also their concerns about Brexit,” Kirby said from Singapore, where he is attending a fintech conference. Kirby had previously announced a government-hosted fintech conference for April 2017 in London, with the goal of attracting firms to London.
With the Autumn Statement upcoming, the Treasury has an opportunity to calm the nerves of many, but for now, Brexit has presented itself as a barrier to growth in an industry that is blossoming in many corners of the globe.