Connect with us

After Brexit, London’s Fintech Future is Foggy at Best

Uncategorized

After Brexit, London’s Fintech Future is Foggy at Best

Londoners are furious at their fellow Brits. Residents of the capital and surrounding counties voted unequivocally to keep the United Kingdom in the European Union. But their compatriots further north — in fact almost everywhere in England and Wales outside the home counties — voted “Leave”, starting a derailing process that will take the UK out of European institutions in about two years, although it could take much longer.

While the consequences for the British economy, and by extension to the rest of Europe, are already beginning to be felt, the people of London are bracing for bigger loses as most of the lucrative financial, real estate, and tech businesses will be affected.

Over half of Europe’s financial technology “unicorns”, such as TransferWise and GoCardless, are based in the London area. The decision to quit the 28-country bloc is already threatening the ecosystem that allows London to trade within the EU, as well as its status as global hub for fintech jobs and technology.

Courtesy of Nika Suchá — PIxabay

“Finance-focused startups are a bright spot for the U.K.’s technology scene, making launch parties at the top of the Gherkin in the City or pizza-fueled conferences at Level 39, the tech accelerator in the heart of Canary Wharf, regular events,” wrote Adam Satariano for Bloomberg. “The so-called fintech industry has benefited from fast-track regulation and EU immigration rules that have lured legions of young European code writers to London from elsewhere on the continent.”

Whilst the UK is not a member of the Eurozone, the single currency area, most EU banking regulations and benefits apply to the country, making it easier for technology firms to offer services and new products to all EU players in the finance sector. Soon those firms won’t be able to bid on EU-funded projects and will face additional regulatory burdens in order to do business with any EU-member state.

A top ECB official said last week that banks in the City of London risked being stripped of their lucrative EU “passports” that allow them to sell services to the rest of the union. François Villeroy de Galhau, governor of the France’s central bank, said that keeping the so-called “passport” would not be an option if the UK leaves the single market of trade in goods and services.

Big banks, as well as commodities and currencies traders, are already thinking about leaving or moving a significant part of their operations and jobs to the continent or Ireland. Last week,Stuart Gulliver, HSBC chief executive, told Sky News: “We have 5,000 people in global banking and markets [HSBC’s investment bank] in London and I could imagine that around 20% of those would move to Paris.”

In an radio interview after the vote, Villeroy de Galhau said: “As long as Britain is in the single market the City can remain a big European financial centre. If tomorrow, Britain is not part of the internal market, the City cannot keep its European passport.”

“What happened on Thursday is bad news, first of all for Britain. Of course there will be negative consequences for the European economy but there will be much more limited than the negative consequences all experts forecast for the UK economy.”

Some experts are forecasting that as many as 100,000 financial jobs could disappear from the City by 2020.

London’s competitors are already launching their pitches. Île-de-France’s regional president, Valérie Pécresse, said Friday, “Our region is prepared to receive all of those that want to come back to Europe,” and added, “Welcome to Paris region, le nouveau Londres”

“Following Brexit, fintech startups may realize it makes more sense to set up an office within the EU, and existing companies may relocate some of their staff to the EU,” said Jan Hammer, a partner at Index Ventures in London, a venture capital firm that has invested in the sector. Splitting with the EU, he said, would “diminish London’s role as a leading fintech hub.”

London is a very resilient city and will adapt. Some businesses, such as tourism, will benefit from a cheaper pound. But the many challenges ahead because of Brexit will reshape some of its business and economy.

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

More in Uncategorized

Advertisement

Recent Posts

Archives

Discover More

To Top