In 10 days, the United Kingdom will vote in the snap general election which may result in a party other than the Conservatives, perhaps Labour or the Liberal Democrats, take power. Ahead of election day on June 8th, I looked at the manifestos of these three parties and examined what their pledges would mean for the fintech industry and the country, as a whole, in terms of Brexit.
I spoke to Liz Lumley, a pioneer in the UK financial technology field and recognised as a fintech icon worldwide, about her views on the future of fintech post-election. “The party that can protect the fintech industry is one that can negotiate a Brexit that causes the least amount of damage to the UK financial services and technology industries – I fear no party has people of that caliber in house,” Lumley said.
As Lumley mentioned, Brexit is a big deal for the fintech sector and since the EU referendum, banks and startups alike have been trying to explore whether remaining in the UK is the best decision for them. In my opinion, the majority of fintechs see Brexit as a danger to their company and there is a sense of needing to protect an organisation and this fear also highlighted by Lumley.
The Conservative pledge to move ‘Forward, Together’ has received a lot of backlash in the past few days, with rumours of a manifesto relaunch. But with Theresa May at the helm, she intends of remaining strong and stable throughout the Brexit negotiations and cutting down on the number of migrant workers.
The Tories have said they would spend more on research and development; I asked Innovate Finance CEO Lawrence Wintermeyer if this meant more investment in fintech. Wintermeyer stated that they welcome the pledge to meet the OECD average for investment in R&D (2.4% of GDP) within 10 years, which would mean contributing £740 million towards digital infrastructure investment.
“We can only hope that any future government will also back further research into technology, as this will form the foundation for an industrial strategy fit for the digital world. Pursuing the promise of digital identity, to shared utilities, and technology-enabled regulation could enable the United Kingdom to maintain its position as a world-leading digital economy,” Wintermeyer said.
Jeremy Corbyn’s Labour party will tackle this issue by setting up a National Investment Bank to provide £250 billion of lending power to infrastructure and this could result in a boost for the financial technology space. Labour also intend on avoiding a Brexit cliff-edge for the UK economy and would focus on how worker’s rights, perhaps any levies added for non-UK workers, would affect a business.
On immigration, which has definitely been a subject of contention in the last couple of years, I asked Wintermeyer about the Tory pledge to increase the amount levied by firms employing migrant workers and how that would affect fintech. “Any increased levy for firms employing migrant workers could make it difficult for cash-strapped startups to hire the talent their need to scale up their businesses. This will consequently have a big impact on the growth of the fintech sector, which relies heavily on a highly skilled, global workforce.
“At least 30% of Innovate Finance’s startup founders/CxOs are non-British. While the Tory party’s commitment to prioritising domestic skills development is welcome, doubling the immigration skills charge will adversely affect fintech, but also more broadly the 5.4 million SMEs across the country, many of which drive innovation, productivity and output for the UK economy,” Wintermeyer said.
Taavet Hinrikus, CEO and co-founder of TransferWise, said that reducing net migration from 273,000 a year to tens of thousands, does not take into account of what the UK actually needs. “Immigration is essential for growth – if you limit immigration, you’re limiting growth.” Hinrikus continued to say that the £2,000 annual fee for each non-EU worker also “stifles growth” and “penalises companies that want to grow and puts UK business at a serious disadvantage compared to the rest of the world.”
Alain Falys, CEO and co-founder of Yoyo Wallet had a similar attitude and spoke about the organisation’s reliance of program developers that are scarce in the UK and means that recruitment from the EU becomes necessary. “An increase in the amount levied for employing migrant technical staff means the case for building off-shore technology centers becomes more relevant,” Falys said.
“Leaving the single market may impact our ability to recruit the tech talents we need and therefore compel us to build technology and R&D centers outside the UK. It may also affect our ability to ‘passport’ our regulatory status across the rest of the EU, which means we would need to create a new regulated entity with the associated staff in an Eu country, like Luxembourg or the Republic of Ireland.”
The Liberal Democrats however, lead by Tim Farron, have a more direct approach to developing the financial technology industry with their pledge to retain London’s rights in the EU financial markets, which ties into their hopes for a second EU referendum. The Lib Dems would also expand the state-owned British Business Bank and Wintermeyer highlighted that this would offer UK fintechs another option to secure capital, perhaps in a similar way Labour’s National Investment Bank would.
“In the 2016 Autumn Statement, the Chancellor announced an additional £400 million in long-term funding to the BBB to boost the country’s innovative sector, which was welcomed by the fintech community. However, this alone will not bridge any later-stage funding gap for UK businesses. As such, alongside repatriated EIF funds, the BBB should also be supported by channelling risk capital beyond traditional venture capital funds to include alternative funding platforms,” Wintermeyer said.
The Liberal Democrat Business Spokesperson Baroness Susan Kramer provided comment on their vision of UK fintech. “Fintechs are a British success story and Liberal Democrats led the way in the Coalition years in providing the financial incentives to make the UK the best place to start an innovative new business. Our manifesto offers further support for both start-up and scale-up. But our global leadership is now being undermined by Brexit as even the smallest and newest look to open a costly second HQ in Dublin, Paris or Berlin and fear that crucial skilled EU workers will avoid the UK as free movement is replaced by a tough visa regime,” Baroness Kramer said.
The Conservative Party and Labour Party did not respond when asked for comment.
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