Given that Theresa May has now made it clear that Brexit will mean an exit from the Single European Market for the UK, the question of what the ramifications of this exit will be has come to the fore. In this article, Ecommerce Europe assesses the likely impact of a ‘clean Brexit’ on the FinTech sector.
Could London’s FinTech Crown slip?
The UK capital is the undeniable center of the European FinTech sector, with the UK government having estimated the value of the British FinTech industry as £20 billion (€23 billion). However, Brexit poses several risks to the future of that sector, and other major EU cities are already positioning themselves to claim London’s FinTech crown.
One the major concerns in the UK FinTech sector is the extent to which the UK government will seek to control immigration into the UK, given the reliance of that sector on migrant labor from the EU. The UK Prime Minister, Theresa May, has signaled that controlling immigration will be a priority for the UK during Brexit negotiations, raising fears that the FinTech sector could be deprived of vital digital skills.
A further fear is continued access to the EU’s single market, which May has already signaled that the UK government intends to leave as a result of Brexit. Without some kind of special arrangement for the financial sector, this exit promises to be highly damaging for FinTech, which is very integrated into the EU market.
Across Europe, major cities are maneuvering to be best placed to gain from the decline of London’s FinTech sector. France’s digital minister, Axelle Lemaire, stated that she has seen increased interest from FinTech start-ups in moving their business from the UK to France, and stressed that France was working to be as attractive an alternative as possible, highlighted recent reforms to labor laws. Other alternative centers for FinTech include Ireland, Luxembourg and Denmark.
The potential for thousands of jobs losses
It is clear that the UK has much to lose from the decline of its FinTech industry, with thousands of jobs at stake. The UK Treasury has estimated that the market employs 60,000 people. According to a recently published report by the Emerging Payments Association, as many as 30,000 of these jobs could be lost. The report is based on the UK leaving the single market, and losing the associated passporting rights, which allow companies to sell financial services to the rest of the EU.
Can the British FinTech sector weather the storm?
However, the decline of the UK FinTech sector as a result of Brexit is far from certain. The sector is showing continuing growth despite uncertainty over Brexit, and UK legislators have shown their awareness of the need to work to shield the sector from the worst consequences of Brexit.
Recent weeks have seen continued growth in the FinTech industry, with Accenture announcing its largest ever FinTech accelerator programme, involving no fewer than 20 startups, and the Belgian Finance Minister, Johan van Overtveldt, visiting London with the hope of promoting greater collaboration between the UK and Belgian FinTech industries.
Meanwhile, Adam Afriyie, a UK Member of Parliament (MP) and Chair of the All-Party Parliamentary Group on FinTech, has stressed the importance of the UK implementing all relevant EU legislation, in order to protect the FinTech sector from potential losses from Brexit. Whether this proves to be the case will be determined by the outcomes of the Brexit negotiations.
Overall, it is clear that Brexit has potentially far-reaching consequences for the UK FinTech industry, but it is not yet clear whether Brexit will deal a major blow to the sector, or whether it will be able to weather the storm. Only the eventual outcomes of the Brexit negotiations will provide definitive answers.