How will Brexit affect the UK’s burgeoning FinTech industry?

How will Brexit affect the UK's burgeoning FinTech...Britain is a leading centre of financial technology, with $1.4 billion (£1.08 billion) of foreign investment finding its way into UK FinTech firms in the second quarter of 2017.


The figures, which come from KPMG’s Pulse of FinTech report, were up from just $100 million in the same three-month period last year.


It appears initial fears that the Brexit announcement would hamper the industry were exaggerated. In fact, nine of the top 20 biggest ever UK FinTech deals have been closed since the EU Referendum vote, according to PwC.


But with Article 50 announced in March, and Brexit negotiations seeming wobbly if media reports are to be believed, will FinTech’s current growth continue once the UK leaves the union?

A snapshot of the UK’s FinTech industry

EY research revealed the country’s FinTech sector was worth approximately £6.6 billion in 2015, employing approximately 61,000 people and attracting £524 million in annual investment.


The KPMG data highlights the staggering growth the industry has experienced; FinTech received nearly twice as much foreign investment in the second quarter of this year alone than in the entirety of 2015.


A recent report from GP Bullhound said the UK and Germany share the limelight in terms of international FinTech favourability. Nine of the top 10 FinTech venture capital rounds are being completed in one of these two countries.


Nevertheless, Britain currently holds the top spot, with three companies valued at more than $1 billion: Funding Circle, Transferwise and Paysafe.

The threat of Brexit

Despite the positive figures, Brexit is already having an impact on the UK’s attractiveness as a FinTech hotspot.


Simon Black, chief executive of PPRO Group, told the Guardian that an “exodus” of businesses could be on the horizon.


“I don’t know of a licensed FinTech company in the UK that isn’t looking at options,” he stated.


“Everyone is thinking about it and anyone that is any size, that is employing more than ten people, is active. The exodus is beginning. It will be more visible in 2018.”


Mr Black said most companies can’t wait for Brexit negotiations to finish before planning to leave because it may be too late by then. If passporting ends, firms will need to get a licence elsewhere – a process that could take up to 18 months in some countries.

How will Brexit affect FinTech recruitment?

Our latest research has shown that professionals across the corporate governance sector are already weighing up their options should Brexit hamper their career development opportunities.


Both British and EU nationals have shown a willingness to relocate to European countries if their job security was put at risk. Moreover, some corporate governance functions rely heavily on staff from EU locations, with businesses facing a significant brain drain if Brexit negotiations go poorly.


Mr Black said FinTech firms that are eyeing up European alternatives will no doubt hire locally, including compliance specialists, who are a crucial commodity for the industry.


He also highlighted some of the recruitment decisions his business is already beginning to make.


“We have 20 people in London, and that has grown rapidly. Without Brexit, I would have been very confident that within five years it would be 200 people in London,” he stated.


“Now it would be more like 40 to 50, and most of the difference will go into Luxembourg.”

What does the future hold for FinTech?

Ultimately, the true impact of Brexit probably won’t be realised for some time.


The research we’ve reviewed is conflicting. Investment and opportunities appear to be on the rise but many businesses are already considering alternative approaches if Brexit negotiations falter.


The situation is perhaps best summed up by the somewhat opposing views of the two KPMG analysts who commented on the firm’s Pulse of FinTech report.


Murray Raisback, global head of FinTech, said it was an “especially exciting” time for the UK. He predicted Brexit would drive FinTech innovation in the country, with banks, insurers and asset managers reviewing their business models and implementing emerging technology solutions to deliver results.


Meanwhile, partner and FinTech leader for KPMG in Ireland Anna Scally took a more cautious approach.


“As a hard Brexit remains a possibility, many financial services companies licensed in London have started searching for possible alternative locations for operations, with Ireland, Luxembourg and Germany all high on the list,” she said.


According to Ms Scally, FinTechs will spend the next six to 12 months increasing their focus on identifying solutions to potential Brexit problems.


So who’s right? Only time will tell.


But if your organisation would like to prepare for every staffing eventuality, or you’re a candidate considering your options abroad, please get in touch with us today.


Our Market Reports combine our review of the prevailing conditions in the corporate governance recruitment market together with the results of our latest employer survey.


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