UK government fintech review to identify key areas to alleviate Brexit consequences

• A UK government review is set to propose measures to support the country’s fintech sector and overcome Brexit-induced challenges.
• The review is expected to recommend a tech-specific visa to ease UK fintechs’ access to overseas skilled workers.
• Insider Intelligence publishes hundreds of insights, charts, and forecasts on the Fintech industry with the Fintech Briefing. You can learn more about subscribing here.

The UK government is expected to publish a review next month setting out plans to boost growth across five key areas of the country’s fintech sector, per the Financial Times. The review will propose measures including attracting skilled workers from abroad and reforming public listings.

Insider Intelligence

The UK’s fintech sector has gone from strength to strength in recent years, but fresh barriers imposed by Brexit could halt its growth.

• Fintech has become an important part of the UK economy. The UK’s fintech sector was worth £11 billion ($14.66 billion) in revenues in 2019, up from £6.6 billion ($8.80 billion) in 2015, and it now accounts for around 8% of total financial services output. In H1 2020, London attracted more fintech private funding than all other European cities combined. This growth can likely be attributed in part to a fintech-friendly regulatory environment, such as the Financial Conduct Authority’s digital sandbox. In addition, the UK boasts a high level of fintech adoption, with 54% of consumers using fintech apps regularly.
• But fintechs now face visa barriers for attracting talent, and UK public listings will no longer have access to an EU-wide pool of investors. Following Brexit, European Economic Area (EEA) workers can no longer move to the UK visa-free. This will have a significant impact on UK fintechs: 42% of their staff come from outside the UK, of which around two-thirds is drawn from the EEA. In addition, the UK-EU Trade and Cooperation Agreement, which came into force on January 1, does not make provisions to continue the free flow of financial services between the two jurisdictions. For example, euro-denominated shares traditionally traded in London have moved to EU-based stock exchanges to retain easy access to all EU investors. In the long run, this could discourage fintechs from picking the UK to go public and trade shares, despite the London Stock Exchange so far attracting fintech unicorns, such as Worldpay and TransferWise.

The review aims to overcome these challenges with targeted regulatory changes, which should help the UK retain its fintech crown. The review is expected to recommend a tech-specific visa to ease UK fintechs’ access to overseas skilled workers. It will also propose changes to the UK listing regime, such as allowing dual class shares structures: Fintech founders would be able to hold shares with enhanced voting rights, while selling a separate type to the public, thus retaining more control over their firm.

This added flexibility could make the UK more attractive for public listings. If these recommendations are implemented quickly, they will help mitigate the adverse effects of Brexit since January 1, and help the UK remain a major fintech hub, per Insider Intelligence’s prediction.

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