While Britain seeks to defend its coveted status as leader of Europe’s technology start-up industry and, indeed, its position as a global fintech centre, cities in the European Union are vying to grab jobs as the UK prepares to leave the EU.
Leading the voices in Europe is French President Emmanuel Macron, to lure fintechs to Paris at London’s expense. The President promotes France as a new home, with talk of 50bn euros in state investment, hopeful it will entice firms away from the world’s leading fintech hub.
The French Deputy Economy and Finance Minister, Delphine Geny-Stephann said France has “really put competitiveness and attractiveness at the centre of its economic reform agenda” over the past year, with a string of measures designed to slash red tape and make the visa process easier.
Such measures were passed last month, enabling the French financial regulator to issue permits for companies seeking to raise funds through various approved means.
In light of the efforts to tempt businesses to France, the lobby group Paris Europlace now estimates that around 3,500 finance and banking jobs will move to Paris once the UK exits the European Union.
A recent Reuters survey also put Paris ahead of Frankfurt as the most popular destination for financial jobs. France’s steps to simplify the framework of its own laws and attract tech talent has, however, raised some eye-brows given that the country has, at the same time, been lobbying for a digital tax across Europe.
With London’s cluster spinning off into cities across the UK, there are now more than 60,000 people employed across a sector worth $16bn, accounting for 40 per cent of the value of all fintechs across Europe.
The UK has strengths in many areas vital to creating a thriving fintech ecosystem. An EY (Ernst Young) study of world-class fintech clusters ranked the UK top for its policy environment, with the most supportive regulatory regime. The FCA (Financial Conduct Authority) is praised for its innovative “regtech” approach, which is now being copied by many international regulators.
Capital pools are deep in the UK. VC (Venture Capital) investment in UK fintechs actually more than doubled in the year after the Brexit vote to $1.8bn, versus an 18 per cent decrease outside UK, according to Innovate Finance. Britain also has a deep pool of skills.
It employs as many people in fintech as Singapore, Hong Kong, and Australia combined. The UK rivals the US for attracting to talent and many of the country’s world-leading research universities have successfully turned their eyes to financial technology and innovation.
Having focused heavily on encouraging this vibrant sector over the past decade, Britain has a thriving incubation and early-stage investment market. No wonder others want a piece of the action — and the approach from Paris shows, UK cannot be complacent. One of the big challenges in the UK has been for fintechs to move from start-up to scaleup.
Although Britain has a growing number of unicorns, the need to broaden out the number of firms scaling up is clear. David Duffy, chief executive of CYBG (Banking Group) and a UK government fintech envoy, says his experience working with fintechs from around the world suggests that a key part of the answer lies in collaboration with traditional finance players, building partnerships to create value for consumers and businesses at scale.
He admits that in this particular aspect, may be Britain doesn’t have the head-start it has in other areas. Leading finance firm PwC found that the UK ranked lower than Germany, Belgium, Holland, Switzerland — and indeed France — for the percentage of financial institutions engaged in active partnerships with fintechs. Less than half of firms in the UK had taken this most basic of steps.
Bank of England governor Mark Carney, recently, quite rightly underlined London’s enduring status as a financial centre, with skills, access to capital and growing tech clusters all being major factors in UK’s long-term success. To fend off the advances of its European neighbours, Britain can add to this the need for greater collaboration across fintechs and bigger banks.
Ambitious fintech companies may not fall for the attractions of Paris, Frankfurt or Dublin any time soon, but without a relentless focus on creating the right ecosystem for their future success, the UK risks losing its pole position in the global fintech community. (The author is our foreign correspondent based in the UK. He can be reached at andyjalil@aol.com).
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