Can The UK's Fintech Sector Prosper Post-Brexit?

Posted: Mar 14 2017, 1:54pm CDT | by , Updated: Mar 15 2017, 5:38am CDT, in News | Latest Political News

 

Can the UK's Fintech Sector Prosper Post-Brexit?
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Fintech is now the fastest growing region for financial technology companies globally. Fintech investment has been growing at 51% per year, which is more than twice the level of investment in Silicon Valley. The value of fintech is huge. It represents a huge chunk of revenue to the UK economy. UK Trade & Investment estimates that fintech is worth around £20 billion across, which is a sizable amount, but with the UK economy slowing down and many questions related to Brexit still unanswered, can fintech continue to prosper in the UK?

Reasons Why the UK is a Global Hub for Fintech

There are many reasons why fintech has prospered in the UK. London is one the world’s major financial services hubs. Many major global financial institutions have their headquarters in London, which means there is a wealth of talent available.

The government is also very accommodating to fintech businesses like ETX Capital, and the business sector as a whole. When George Osborne was Chancellor of the Exchequer, he gave the go ahead for a number of important funding initiatives designed to nurture fintech businesses operating in the UK. These included six research centres for fintech companies and a government approved manifesto to make the UK a world leader in fintech by 2020. Corporation tax has also been cut to 18% for UK businesses, leaving more cash available for research and innovation.

There is also less regulatory red-tape in the UK, and nothing hampers innovative fintech start-ups like red tape. The Financial Conduct Authority (FCA) published plans to let fintech companies test out financial products and services without being restricted by regulation.

Brexit Effect on the UK Economy

What happens when the UK leaves the EU is uncertain. It seems likely that the UK will exit the Single Market as well as the European Union, but how this will affect the economy is not yet clear. At the moment, the economy is showing signs of slowing down and inflation is rising. The pound is weak and is likely to fall further once we leave the Single Market.

However, there is every indication that departing the EU is not going to affect the UK economy as much as many people initially feared. Since the EU referendum vote, the Bank of England has revised its forecasts for the months ahead. At the beginning of February, the BoE predicted the economy would grow by 2% this year, which is a lot more positive than the dire forecasts from last June.

Financial Services Post-Brexit

There is every indication that the financial services sector is also looking more positive post-Brexit. There was concern that some banks would decide to relocate to Europe when the UK leaves the EU, but this now seems unlikely to happen. The City of London offers things financial institutions simply can’t find elsewhere, including a highly skilled workforce ecosystem, a time zone that bridges the US and the Far East, and a central geographic location.

Fintech and the financial services sectors are inextricably linked, so one can’t survive without the other. London is unlikely to lose its status as a major finance hub and with the UK government keen to continue supporting fintech innovation, there is every reason to assume that the fintech sector will continue to prosper in the UK.

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The Author

<a href="/latest_stories/all/all/2" rel="author">Luigi Lugmayr</a>
Luigi Lugmayr () is the founding chief Editor of I4U News and brings over 15 years experience in the technology field to the ever evolving and exciting world of gadgets. He started I4U News back in 2000 and evolved it into vibrant technology magazine.
Luigi can be contacted directly at ml@i4u.com.

 

 

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