Fintech & Brexit: The Consequences Explained
Earlier this year, the UK triggered Article 50, and we have now moved on to the lengthy and messy divorce process from the European Union. The surprise vote result back in June 2017 shocked much of the nation, and perhaps especially the former prime minister Cameron. Since then, the Pound has fluctuated, prices have rocketed, and many large corporations are threatening to relocate from the UK to richer, more lucrative pastures.
However, experts are saying the real impact is yet to come. With the government failing to agree on anything even slightly resembling a detailed plan for the exit, the Fintech industry in particular has been left in a state of uncertainty. What does Brexit actually mean for the future of the sector?
While it’s still early days, it will undoubtedly have an impact on businesses across all sectors, but especially UK fintechs have started preparing for the worst. A potential “hard Brexit” or “cliff edge Brexit” as it is also affectionately known as, means there is no way back for the UK should they regret their decision after the divorce goes through. For London, which is currently one of the most active fintech hubs in the world, this will mean a sudden loss of access to the single market, a possible loss of European tech talent, as well as the loss of ability for banks to trade freely across the continent. These drastic changes will inevitably lead to many fintechs upping sticks and moving their headquarters elsewhere. Perhaps most devastatingly, it will cut the UK off from the pool of fintech talent currently available to them from around the world.
Don’t just take our word for it though - Russ Shaw, founder of Tech London Advocates and Global Tech Advocates, recently warned of extremely grave consequences for tech startups in the UK, and particularly those of the fintech nature. Shaw didn’t go as far as saying that they should get out altogether, but he strongly urged them to begin building a presence elsewhere on the continent.
Migration is Well Underway
While a Brexit deal might still seem like a long way off, the migration of fintech firms is already well underway. The Financial Times recently reported that global payment platform Currencycloud, who currently boasts headquarters in the UK, have already begun rolling out their post-Brexit plan. The word on the street is that they have tendered an application for a Dutch license in a bid to ensure that they can maintain their services to EU clients – as well as retaining access to the rich talent pool it boasts.
In an interview with the Financial Times, Currencycloud’s Chief Marketing Officer commented on the upcoming move: “While we’d love for the UK to have a soft Brexit you can’t guarantee that. Our concern is about how we service customers and how we make sure we’re bringing the best talent in to the organization.” Other UK fintech are also taking the same reluctant approach. While many fintechs originating from the UK are against moving from their birth market, many realize that they must put the needs of their company first. Facing Brexit, they need to ensure their own survival.
Britain’s Got Talent
Britain boasts a wealth of tech talent which is a combination of homegrown, and external prospects from around the globe. In many ways, this is what makes London one of the most vibrant tech hubs in the world. It’s safe to say that without Brexit, the UK would have an extremely bright future in tech – with many extremely gifted workers coming up through the ranks and doing some very exciting works in the sector.
The possible impacts of Brexit splits opinions greatly. Tom Blomfield is the CEO of Monzo, an app-only bank which is currently setting the market alight with its easy to use app and nullification of internal charges. Blomfield, however, appear to remain positive about the situation and claims that “harmonized regulation” is needed in the UK to survive post-Brexit. In other words, Blomfield believes UK fintech firms can still carry on working and trading with the Eu, and vice versa. Everyone must have faith that while the law and restrictions will change, the good work being done in the sector will remain the same.
Christophe Rieche, CEO and co-founder of Iwoca, a credit platform for small businesses, shares Blomfield’s sentiments, which makes it seem like the UK is maybe not in as poor as a position with regards to Brexit as first thought. “Today we cover all regions we are operating in – UK, Germany, Poland, Spain – from our London headquarters." Rieche believes this is possible because London offers deep pools of talent for native speakers across all levels of seniority and functions from developers, marketers, account managers to credit analysts. While he remains positive, he feels that if post-Brexit makes it impossible to hire people from across London, then they will have to regrettably relocate some or all of their operations to somewhere within the EU.
He emphasizes that this is only a worse-case scenario.
In recent months, the UK’s quota for tier two skilled workers (a long-term visa allowing workers to fill a skilled job in IT, accountancy, teaching or healthcare) from outside the EU has been reached, which has understandably sparked fear in the fintech sector in particular. The concern is that post-Brexit this quota may not be as high - or exist at all for that matter - sparking a potential mass exodus of EU native IT and tech professionals, which will leave firms shy of the necessary expertise and qualifications.
Brexit is in many ways reducing the availability of skilled staff, who for a specialist sector like fintech do not come along every day. It is not a given, but it is likely that the impact of Brexit with less EU workers coming to the UK, and the general uncertainty surrounding people’s fates, is fueling the increased demand for visas. The global market is a dog-eat-dog world for nations, and workers can change their minds as they please and go to other countries. The tables have now reportedly turned in such a way that tech firms are now being turned down by the prospective workers because of Brexit, rather than the norm of the firm being in the driving seat.
This is a worrying reality for UK fintechs. They need the expertise EU workers offer, and at the moment Brexit is threatening to cut this off at the source.
Whether or not it will be harder for London, and UK fintechs in general, to compete on the global stage remains to be seen. The fact many influential leaders in the UK fintech sector are remaining so positive about their post-Brexit future is more than reassuring.
On the contrary, some seem to believe that Brexit could actually create opportunity for startups in the regulation technology – or the “regtech” – market, which there will be far more of a need for in the UK post Brexit. It is a relatively new field within fintech which utilizes information technology as a way of enhancing regulatory processes. It puts emphasis on reporting and compliance, which is why there will be such a need for it in the UK and companies trading with them post-Brexit.
Whichever way you look at it, Brexit is happening. It will undoubtedly bring a great amount of change for many aspects of society, the fintech sector being one of those. Preparation is key and fintech firms having a plan in place in the worst-case scenario is advisable. Remaining positive and thinking outside the box for ways they can remain working as normal post-Brexit will be a good start in retaining those valuable and loyal clients and customers they have worked tirelessly to get on side in the first place.
It’s an uncertain time for us all, but one in which we should work together to make work and keep the UK as the business hub it deserves to be. What do you reckon - is it time to panic?
Amazon Web Services vs Microsoft Azure
Are you looking for cloud services, but don’t know where to start? In this e-guide, we’ll look...
7 Benefits of VoIP for SMEs
Referred to by many as internet telephony, VoIP has become a widely used technology in recent ...
HR Software Success
To meet the set standards of their industry, HR teams require access to the right tools. In th...
Introduction to Remote Support Software
It’s always inconvenient when IT equipment fails. With a Remote Support Software, your busines...
SugarCRM vs. Oracle
Customer Relationship Management solutions are integral sales tools suitable for any business,...
Mobile ERP Options
Are you ready to take your business intelligence with you on the road? Here's our shortlist of...
Important ERP Reporting Metrics
Because of their vast flexibility, it can be difficult to know exactly which reporting metrics...
Global IT spending to hit $3.76tn
A new report by the global analyst reveals that organisations will spend a combined $3.8tn on ...