Why fintech start-ups are safe in post-Brexit UK
What article about the state of the UK Fintech sector can begin without reference to Brexit? It’s impossible, at the time of writing this, to attempt to make sense of any UK industry without first putting it in the context of post-Brexit and all the implications that go with it.
It’s rare, too, that any serious (or humorous for that matter) article does not contain some reference to Mr Trump and his shenanigans. Relax … he gets no further mentions in this piece!
It is with a mild sense of genuine optimism that I am writing this. Optimism, or a mild case of delusion, as the nation trundles on in the wake of Brexit, experiencing socio-economic and political disruption perhaps not experienced since Churchillian times.
As we find ourselves entering into this new paradigm of pseudo-independency, it is time to take stock and consider what the landscape looks like going forward. Somewhat surprisingly, we still have all our faculties intact. Employment is almost at a historic high, the pound has regained much of its strength and the Footsie 100 has recorded figures never achieved before. Green shoots, once the ridicule of previous political leaders, are indeed beginning to show through the economic doom and gloom of the darkest days of our self-imposed national austerity and we have not been overrun by an influx of the ‘dreaded migrants’ of the East.
To make matters even better, or crazier, depending on your point of view, the Belgians have just announced that they are intent on forging stronger ties with UK Fintech start-ups.
A recent delegation led by the convivial Belgian finance minister, Johan van Overtveldt has started talks with the UK fintech agency Innovate Finance with a view to establishing collaborative projects between the two like-minded communities and is shortly due to announce a new Brussels-based hub to support technology start-ups on their journey to London. “Brexit will not get in the way of fintech advancing in the UK and Europe,” says Lawrence Wintermeyer, CEO of Innovate Finance. “Many continental fintechs continue to see London as an attractive destination and we are keen to support future collaborations for our members on the continent with B-Hive.”
To some doom merchants, this may well come as a shock. Most commentators seem to be predicting the meltdown of the UK finance sector, suggesting it will reappear in Dublin, Paris or even Shanghai. But to the thousands of Michael Porter fans and other believers in the ‘cluster economy’, the insight shown by the very astute Belgians is nothing more than ‘good business sense’.
When Porter, as far back as 2003, was commissioned by the UK government, presented a paper based around ‘UK competitiveness’ the assessment was mixed. Noted was the success of macroeconomic policy, most notably in historically low levels of inflation and unemployment. However, the assessment of UK business performance pointed to:
- insufficient investment in capital assets and innovation
- positioning on low input costs rather than high added-value
- adoption of modern management techniques was lagging.
Contributory factors to the state of UK businesses included:
- the short-term outlook created by the UK’s equity-based financial market
- a low level of complementary public capital assets
- low workforce skills
- low investment in universities and the public research sector
Metal Box Factory … an example of a technical cluster
Amongst the key points raised by Porter was his view that there was a general tendency in the UK to lag in adopting modern management techniques. “Some new management techniques are difficult to communicate in the abstract. They are best learned through interaction with other managers or professionals in the same cluster or industry – processes which institutions for collaboration facilitate and support,” reported Porter.
Porter also noted that in the UK, in contrast to the US, there had been a divergence in regional prosperity. Porter attributed this persistent prosperity gap between regions in part to the absence of effective regional or local government in the UK … let’s save discussions about ‘The Northern Powerhouse’ for another day!
It is therefore not surprising that the Belgians have identified the collateral benefits of engaging with the UK Fintech sector perhaps at a time when they could be forgiven for following others scared by the early fears raised at the shock results of the referendum.
The Cluster Economy
The UK cluster economy coupled with the ‘gig’ economy has already developed a mature network of shared workspaces enjoying generous tax-breaks and other well-established benefits such as free wifi spaces, collaborative clubs and hot-desking made easy through contactless payment systems and other facilities. Benefiting from one of the most expansive crowdfunding industries in the world is also adding weight to the benefits of being UK-based, despite Brexit. Given the surge in new business enquiries currently experienced by ourselves and our neighbours in the digital cluster that is London, we welcome the Belgium with open arms and look forward to an incredibly exciting future servicing the Fintech industry for a long time to come.
Nadio Granata mcim, fhea, airp is Head of Content at makepositive.com and Associate Lecturer at University of Leeds Business School