Establishment of a £1bn ‘Fintech Growth Fund’ and creation of a private sector-led Centre for Finance, Innovation and Technology are among the recommendations of a landmark government-commissioned review to boost the UK’s fintech sector.
The six-month independent assessment, whose start was delayed due to the Covid-19 pandemic, today (26 February) presented its conclusions, which focus on how the government can best help fintech companies to grow.
The HM Treasury-commissioned Fintech Strategic Review was led by Ron Kalifa OBE, a former chief executive of international payment processing company Worldpay, and addressed three objectives: ensuring UK fintech has ‘the resources to grow and succeed’, encouraging ‘widespread adoption of fintech solutions’ and ‘maintaining and advancing the UK’s international reputation’.
Recommendations in the 108-page publication also include implementing what is dubbed a ‘scale-box’ to provide regulatory assistance for firms that have moved beyond start-up status.
Proposals that had already been widely tipped by media, such as changes to UK listing rules and tech visas to fast-track the immigration process for fintechs, are also included. About 42% of UK fintech employees are ‘foreign talent’, according to the report.
Recommendations across five areas
The review operated through five workstreams – policy and regulation, investment, international, national connectivity and skills – and the findings are presented in the same fashion.
Recommendations in the first category include: the ‘scale-box’ to support firms that are focused on scaling innovative technology; delivering a ‘digital finance package’ that creates a new regulatory framework for emerging tech; and establishing a digital economy taskforce ‘to ensure alignment across government’.
In respect of investment, the £1bn (about $1.39bn) Fintech Growth Fund would seek to ‘unlock institutional capital’. Further proposed measures include the expansion of R&D tax credits, as well the Enterprise Investment Scheme and Venture Capital Trusts (UK tax relief schemes); improving the listing environment through free float reduction, dual-class shares and relaxation of pre-emption rights; and ‘creating a global family of fintech indices to enhance sector visibility’.
For international, proposals include launching a ‘Fintech Credential Portfolio’ (FCP) to support international credibility and increase ease of doing business; establishing an international fintech taskforce; and encouraging international collaboration through the Centre for Finance, Innovation and Technology.
The proposed new centre also features as a highlight of the review’s national connectivity workstream, with Kalifa’s report envisaging it co-ordinating national fintech strategy. This workstream includes a proposal to accelerate the development and growth of fintech clusters through further investment, such as in R&D.
For skills, the report recommends ‘retraining and upskilling adults in support of UK fintech by ensuring access to short courses from high-quality education providers at low cost’; and measures to support work placements in fintech companies.
Competition, Brexit and Covid: three threats
The report is likely to be well read beyond the UK, whose fintech sector is among widely regarded as among the most vibrant in the world. When the review got underway the government described the fintech sector as being worth £7bn ($9.76bn) to the UK economy. Today’s publication ups the figure to more than £11bn (about $15.34bn).
But while the UK’s position is ‘well established, its future is not assured’, the report notes, describing the ‘trajectory of UK fintech [as] at an inflection point of opportunity – and risk.’
The report identifies three major threats to the UK’s position: competition from jurisdictions such as Singapore, Australia and Canada; Britain’s recent exit from the European Union; and Covid.
‘The pandemic has accelerated digital adoption globally in a way that marketing or policy never could,’ the report notes. ‘This is creating opportunities for jurisdictions that are quickest to diagnose what’s happening and nimblest to capitalise on the opportunities for fintech’.
UK aiming to ‘retain fintech crown’
“Fintech is one of the UK’s great success stories and will help us seize new opportunities around the world,” said chancellor Rishi Sunak in a press release presenting the review.
“We must now build on our global reputation for fostering innovative start-ups and ensure firms can access the talent, finance and support they need to scale up here in the UK. This review will make an important contribution to our plan to retain the UK’s fintech crown, create more skilled jobs, and deliver better financial services for people and businesses,” added Sunak, who is due to present the Budget next week (3 March).
The government will examine the review’s recommendations and respond in due course. The report concludes by saying that ‘one year from today, both the public and private sector must come back to report on the progress they have made to deliver the recommendations’, adding that the government ‘should consider appointing a fintech “business champion” to support fintech and deliver this strategy.’
The review was announced in Sunak’s debut Budget last March and kicked off after the Covid-caused delay in July. Its five workstreams were overseen by: Kay Swinburne, a former Conservative MEP now working for KPMG (who examined policy and regulation); Anne Glover, co-founder of Amadeus Capital Partners (investment); Omar Ali of professional services consultancy EY (international attractiveness); Gerard Grech, chief executive of Tech Nation (national connectivity); and Sherry Coutu, chair of SVC2UK (skills and talent).
Kalifa was chief executive of Worldpay for more than 10 years until 2013, remaining as an executive director until February 2020. He is chairman of online learning platform FutureLearn and part-time chairman of payments company Network International.
The government recently announced that it to spend £10m to establish a twin-site UK Centre for Greening Finance and Investment (CGFI) to put climate and environment ‘at the heart of UK financial decision-making’. The centre will begin operations in April, with physical hubs in London and Leeds opening ‘months’ later.