UK’s fintech sector is facing tough challenges. The Brexit negotiations haven’t properly started yet and the country is currently in the midst of a general election campaign. For the sector, this means uncertainty about the future.
On Thursday, UK’s fintech trade body called for the government and all the country’s political parties to pledge stronger support for the fintech sector. Innovate Finance said the country is facing a tough global landscape and in order to compete, the trade body needs guarantees of support.
Focus on a highly skilled workforce
Innovate Finance’s main message to the UK government centred on the need to maintain a strong flow of highly skilled workforce to the UK. For the trade body, this means focusing on the domestic workforce in terms of better access to education and resources but also the promise to prioritise positive immigration during and after the Brexit negotiations. The trade body wants the political parties to pledge the country will continue to have an efficient visa system and a positive immigration policy even as the country prepares to leave the EU.
“Much of the talent which underpins UK fintech is global in nature, for example our own research shows that 30 per cent of Innovate Finance’s (non-institutional) founders are non-British,” the trade body said. Furthermore, Innovate Finance went on to point out the issue of a highly skilled workforce is not just a concern for fintech. The trade body highlighted how one in five of the three million digital economy sector workers being born outside of the UK – with third of them coming from EU countries.
Ensuring access to capital and markets
The trade body also called for the political parties to guarantee the sector can maintain proper access to capital and markets. Innovate Finance wants the government to help fintech companies to gain better access to finance at all growth cycles, to incentivise corporate venture capital investments and to provide a clear tax investment scheme that promotes venture capital and private equity investments.
The worry for the trade body is that Brexit won’t just impact access to a highly skilled workforce but also access to investment. The sector will likely be removed from the European funding frameworks, which would be a big hit in investments for the digital economy. Between 2011 and 2015, the European Investment Fun committed €2.3 billion to UK-based venture firms.
Furthermore, while the global fintech sector increased its venture capital investments by 10.9% year-on-year in 2016, UK fintech saw declining levels of investment. The sector’s investment declined by 33.7% year-on-year, although the investment has picked up slightly at the start of the year. The UK currently ranks 3rd in the global investment, but the trade body has reminded the politicians that the ranking might not last forever unless the right kind of commitment is shown.