The UK’s fintech sector is thriving on the influx of specialist skills that are independent of nationality and currently employs 44,000 people: more than New York or Silicon Valley. If we are to maintain our place atop the “Global Financial Centres Index“, the UK must stay open to the global talent pool on offer, or risk a rude awakening.
The payments industry could be in particular danger in the face of a Brexit due to licensing issues. Financial services organisations within EEA countries are currently rewarded a “passport” which helps firms operate across European borders, and this may be affected by a Brexit. Organisations may, in effect, be forced to consider operating via overseas offices to continue to benefit from passporting regulation, in countries such as Ireland.
A major fear is that UK fintech startups would become less attractive for investors if the UK leaves the EU. Fintech attracts investment globally, bringing over £500m to the UK in 2015. This booming industry relies greatly on investment for success, but a Brexit has the potential to change everything.
Read more about the Brexit debate:
- The EU debate: A critical role for business
- Our readers have their say on whether a Brexit would negatively impact their companies
- How Brexit will impact UK investment market
A significant portion of UK startups rely on investment from EU countries, supplied in part as a result of the European Investment Fund (EIF). This is an initiative which involves the allocation of money from the EU to venture capital organisations throughout Europe, which they are then expected to invest in startups. A Brexit could ultimately mean that UK fledgling businesses suffer as a result, depriving them of the funding required to succeed and fuelling the economy.
If this is the case, investor attention will turn elsewhere with Paris, Berlin and Madrid being the main contenders for the Fintech capitals of the world. In recent years, all three have witnessed the rewards that London has reaped, and have not been sitting idly.
Recently dubbed the global tech hotspot, Amsterdam also has a chance of overtaking the spot. In 2015, the “Digital City Index” ranked Amsterdam as the second best city in the region – behind London – for tech startups.
We are seeing people holding off from backing UK companies until after the referendum and that’s nothing more or less than the result of uncertainty. The positioning of the UK as a hub for business is immensely dependent on the outcome of the vote on the 23rd, and so businesses must plan for both eventualities. Since the eventualities are markedly different from one another, strategic planning must wait until after the referendum – otherwise companies may find they have taken five steps in the wrong direction.
To lead a company to success you need to pick your moment carefully – so much of the success of a company is being positioned correctly in the right market at the right time. With the referendum looming over us, the uncertainty associated with it is preventing start-ups from making big decisions – after all, why risk it at the moment? Investors could possibly be discouraged by a company that may have to relocate its headquarters to maintain efficacy, and that is certainly the case for some if the “Leave” campaign succeeds.
Paresh Davdra is co-founder and CEO of RationalFX.
On Thursday 23 June, the UK will vote on whether it wishes to remain in the EU. Karen Bexley, head of employment law at MLP Law, takes a look at the Brexit debate and gives comment on some of the potential changes to employment law following the referendum.