Musings from London Tech Week – FinTech, Policy and Government Affairs
The FinTech industry was in a mood for celebrating last week, as over 55,000 stakeholders from across the Tech landscape came together for a week-long festival of events, announcements and debates on how the UK’s digital economy should move forward. The timing of London Tech Week couldn’t have been better planned, as 2018 is showing every sign of being another strong year for FinTech.
Innovate Finance has been busy working to ensure that government, regulators and investors recognise the strength and importance of the UK FinTech ecosystem. As a result of this ongoing work, FinTech is now being squarely recognised in discussions impacting the future of financial services as well as those around the Tech industry.
Innovate Finance’s Money Talks: VCs Take the Stage event (12/06), which saw VCs pitch before a panel of startups, showcased this level of investor confidence and interest in the FinTech sector.
Indeed, just days before London Tech Week kicked off, new figures emerged showing that FinTech companies in London alone have secured £1.7bn of VC funding since 2016. In total, UK tech companies received around £5bn – more than Germany (£2.15bn), France (£1.55bn) and Sweden (£644m) combined. Positive investment into the UK was also reflected in news that Salesforce is to invest £1.87bn over the next five-years and, in the process, joins the likes of Facebook, Amazon, Apple, Google and IBM in expanding their presence in the UK.
The following day (13/06), Prime Minister Theresa May hosted a Tech Investment Roundtable at Number 10. The meeting focused on strengthening the UK’s position as a world-leading destination for tech investors and featured the announcement of the British Patient Capital Fund – a new £2.5bn programme designed to enable long-term investment in high-growth companies across the UK. This announcement follows policy recommendations from both Innovate Finance and the City of London Corporation that highlighted concerns on the ability to raise greater levels of capital funding.
Despite ongoing Brexit negotiations, these announcements and the many others made last week demonstrate levels of commitment and cooperation between regulators, government and industry that continues to set the UK apart. Nevertheless, there still remains a number of challenges moving forward to ensure that the UK remains the innovative hub of Europe beyond Brexit. We at Innovate Finance have provided our thoughts on some of the wider implications of the events and developments that occurred last week, their relevance to the FinTech industry, and where Innovate Finance continues to play a key role.
Renewed Government support
13/06 – British Patient Capital Fund
Innovate Finance welcomes the British Business Bank’s announcement of the British Patient Capital Fund. It is a positive sign of the Government’s commitment to the sector and honours the commitment made by the Chancellor at the Autumn Budget 2017. The programme is also one of the key outcomes of the Patient Capital Review and is a vital element of the Government’s Industrial Strategy. Investing alongside the private sector, the British Patient Capital will support £7.5bn of investment in British businesses. The availability of such financing is critical in enabling more FinTech companies to scale – more so given the recent retrenchment in European Investment Bank funding.
12/06 – Startup Visa route
The Home Secretary Sajid Javid’s announcement over Tech Week of a new startup visa route for people who want to found their own business in the UK is positive news for FinTech entrepreneurs. This will bring further innovation to the UK, as well as adding to the 2.1 million talented workers employed in the UK’s digital economy. Of course, further work must also be done on ensuring the UK remains open to talented overseas professionals post-Brexit, for example by having a Tier 2 Visa system that is fit-for-purpose. Of equal importance, the UK Government will also need to prioritise equipping domestic talent with the skills required for an increasingly digitised economy.
Innovate Finance has long-called for the development of an immigration strategy that is aligned to a modern industrial strategy and framework. To read our latest report on “Accessing a Global Talent Pool” click here.
EU Withdrawal Bill Implications
12/06 – ongoing
The Bill to repeal the European Communities Act 1972, and the source of European Union law in the UK, is currently at the stage of Parliamentary “ping pong” where it goes back and forth between the Commons and the Lords until all points of disagreement are solved. Last week, MPs sat down to discuss and vote on 15 amendments posited by the House of Lords.
In particular, the debate over the amendment that seeks to empower Parliament with the ability to reject a “bad deal” and direct the Government to re-enter discussions will prove to be a pivotal and defining moment in determining what type of Brexit the UK FinTech industry will get. Failing this, it will at least give a better understanding of the British structure of power in relation to exiting the EU. Theresa May managed to avoid defeat last week by making some concessions to the pro-EU faction within her own party at the final hour. However, it is widely speculated that these commitments will fall through and, given the House of Lord’s rejection of the amendment this week, there is yet more “ping pong” to be played!
Women in Finance Report – HM Treasury Select Committee
The Treasury Select Committee published a unanimously agreed report last week calling for the reform of bonus negotiations and promotion of flexible working in order to abolish the pervasive ‘alpha-male’ culture seen in finance.
We at Innovate Finance recognise the immediacy and importance of this issue, for example through our annual Women in FinTech Powerlist, which celebrates the key female influencers and figures within the FinTech sector. Beyond this, Innovate Finance recently launched a member-peer working group together with the creation of a 12-month initiative, that will seek to review where diversity gaps exist in the industry.
Smarter London Together Roadmap
The Mayor of London’s launch of the Smarter London Together roadmap to make London ‘the smartest city in the world’ is a message of the ongoing commitment to the Capital’s tech scene. This roadmap is intended to be a flexible and cohesive digital masterplan for the city, setting out how collaboration with different boroughs and services can work effectively with the tech community. In light of the ongoing Brexit discussions, this announcement should serve to boost investor and business confidence in the (Fin)Tech industry. It is clear that the government sees London’s future as a global city of innovation where the best ideas are developed with the highest standards for privacy and security in the world.
DIT – FinTech Steering Board
The Department for International Trade’s newly announced FinTech Steering Board met for the second time during London Tech Week. The Board, on which Charlotte Crosswell (CEO, Innovate Finance) sits, was announced by International Trade Secretary Dr Liam Fox MP, and seeks to drive new investment into the UK FinTech sector. The Steering Board brings together academics, industry experts, government and regulators to help shape the UK’s future FinTech trade and investment strategy. The group is chaired by the City of London’s Lord Mayor, Charles Bowman, and will convene four times a year.
It is clear that the UK’s flourishing tech ecosystem continues to catch the eye of prospective firms, from Salesforce to the ‘likes’ of Amazon. This will provide jobs to thousands of skilled workers and is further bolstered by the announcement of the Home Secretary regarding the new startup visa route – which signals a step in the right direction.
The on-going Brexit discussions will likely continue to be the biggest potential challenge for FinTech. Navigating the discussions in a way that results in a beneficial regulatory and supervisory framework is vital in providing FinTech businesses and investors with a sense of certainty, stability and proportionality beyond the transitionary period. More clarity on the Government’s plan for the post-Brexit relationship with the European Union should be provided in mid-July, when its Brexit White Paper is due to be published.
The UK’s rich history – from Turing’s pioneering computers, to the world-wide web, showcases that we are a nation of digital pioneers. There is undoubtedly a rich and diverse ecosystem of tech startups and scale-ups echoing this sentiment today. The measures taken last week, many of which have been supported by Innovate Finance, will allow innovation to flourish and startups to invest in their future.
To get in touch with our policy team, and discuss any of the above, please feel free to email us on email@example.com.
Sameer, Peter and Josh.