In his first and last Autumn Statement, Philip Hammond announced plans for investment into the UK’s tech start-ups, with £400 million being invested into venture capital firms. In real terms, this will equate to £1 billion of investment into the country’s technology sector through the British Business Bank; undeniably a positive step forward for post-Brexit confidence.
Start-ups and smaller businesses need the chance to grow at a sustainable pace. This access to funding will not only help them to maintain their growth at a steady rate, but also for many firms it could be the funding boost they need to get started altogether.
The tech landscape post-Brexit
Start-ups across a number of sectors are concerned about potential barriers to raising capital as the Brexit process heats up, particularly when it comes to exporting products and services. Many are considering looking further afield than Europe for business opportunities, which whilst an exciting prospect, inevitably comes at a cost.
For the technology sector in particular, start-ups are looking to scale up and once large enough, complete their exit strategies, e.g. being acquired by a larger firm, floating on AIM or merging with another technology provider to disrupt a particular sector. However, the vote to leave the EU has caused ripples across the industry. Whilst the UK has become an attractive place for investment thanks to the drop in Sterling’s value, our tech sector has seen a drop in M&A activity over the past few months. The Chancellor’s statement acts as an affirmation that the technology sector, and its start-ups in particular, are worthwhile investment opportunities and will undoubtedly be considered as welcome news.
Fintech in the UK
The fintech industry in the UK is booming. Fintech firms have historically been able to make faster, more efficient decisions than the big banks due to their smaller size and better technological capabilities. We’re currently seeing banks choosing to foster fledgling fintech companies through accelerator programmes, over investing in their own technology.
Firms in this sector are not only helping the national economy, but also promoting competition and growth across the financial services sector more widely. The UK is in a prime location to be a leading fintech hub for worldwide trading, able to conduct business with the US markets in the evening, and the Asian markets in the morning.
According to a report from EY, approximately £5.5bn was invested in the UK’s fintech sector, over £1 billion more than the rest of Europe combined. Thanks to governmental support of this thriving sector, the UK is leading by example to the growing global fintech community.
What about London?
London is undoubtedly the European capital of fintech, if not the global leader. Our capital has a somewhat unique situation amongst global cities, as it is not only the historic financial sector, but also is the most prominent area for technological innovation. Other key technology hubs such as Silicon Valley and Berlin have their financial counterparts in New York and Frankfurt, so do not have access to the same level of collaboration amongst these sectors as the UK does.
The Autumn Statement acts as a boost to London’s existing high status in this sector, as start-ups across Tech City and beyond can gain access to much-needed funding via the British Business Bank, with the hope that this already prominent hub will be able to grow and become even stronger.
A movement towards a range of fintech hubs across the globe is on the horizon. Fast growth in the APAC region has been dominated by China and India thanks to specialisms in insurance, risk and regulation technology. These younger versions of fintech are allowing the sector to collaborate with traditional financial services firms on a wider scale, driving the notion of collaboration across the entire financial sector.
Following the Brexit vote, it has been vital for London to bolster its fintech links on an international scale. Fintech bridges have already been created with growing, tech-savvy nations such as Singapore, the Republic of Korea and, most recently, Hong Kong; where the UK’s FCA and Hong Kong’s Monetary Authority (HKMA) have both agreed to share information about innovations in financial services in their respective markets.
Since the Autumn Statement, the Chancellor has also embarked on a series of international trips to further strengthen global fintech ties, visiting South Africa, the Republic of Korea and Japan.
With the rise of these other worldwide hubs, partnerships such as those with Singapore and Korea will be crucial to helping the London fintech centre to innovate and grow, whilst ensuring that it remains the location of choice for fintech start-ups to scale up successfully.
Fostering partnerships with other emerging fintech markets will help to maintain the UK’s current fintech prowess, whilst this intended government funding will give start-ups in this sector access to the financial support they need to grow. Whilst the presence of fintech is growing in regions such as Tel Aviv, Singapore, Korea and San Francisco, the increasing prominence of fintech in hubs such as Manchester, Birmingham and Leeds, means that the UK as a whole can position itself as a global fintech body, with London at its heart.