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NEWS ANALYSIS
Can London weather the Brexit storm and hold its fintech crown?
Junior Reporter Henry Vilar
F
ollowing the result of the Brexit referendum and the rather tumultuous state of political affairs in the UK, many fintechs and banks are increasingly concerned about the viability of the country, and in particular, London, as a place to continue operations.
Recently, IBS reported on David Birch, director at Consult Hyperion, saying that “competition is not between the UK and Germany, or France. It’s between London or Paris or Frankfurt. We will see the mayors of these city exercise greater powers, and become very important positions.”
This question has two obvious sides. The first one is whether business after Brexit will be as prolific in the English city as it has traditionally been. The consequences of this affect the whole of the country as well as the rest of Europe. The second one, is how the fintech industry will react to any changes that may take place, and whether UK fintechs will be able to take the hit.
Yes, we Khan
Sadiq Khan, the mayor of London, has kept this issue a priority in his to-do list, touring throughout Europe in the past few months to make a case for the city ahead of the Brexit negotiations. “I vowed to be the most pro-business mayor this city has ever seen and it is vital that we demonstrate to our partners overseas that, despite Brexit, we remain open to business, investment, talent and ideas”, he was reported saying.
His pro-business campaign reached the World Economic Forum last January, where he tried to gain Europhile companionship by pointing out that “if businesses decide to leave London, they’re not going to move to Paris, Madrid or Frankfurt, they’ll be going to Hong Kong, Singapore, or New York. So ‘hard Brexit’ is a lose-lose – bad for London, bad for the UK, bad for the EU.” This may grant him a few sympathisers across Europe.
In that same event, he was reported saying: “I’m confident that London will remain Europe’s leading business hub. London is – and will always continue to be – open. […] Despite Brexit – London will always remain a European city – the cultural, social and economic capital of Europe.”
However, the hearty politician can only swim against the tide for so long. The complications following the most recent election and the political divide in the country do not convey a sense of stability, as TransferWise CEO Taavet Hinrikus has pointed out: “People now have the notion that the UK is more closed off to the outside, which may drive business away,” he said.
Quitters and winners
Luckily, Sadiq Khan is not alone in this crusade. From the looks of it, it would seem that Khan is successful enough to, for example, enlist some of the largest Spanish companies, Telefonica and Ferrovial, in his future plans for the city. The urbanite startup crowd of the city has also naturally backed the pro-business attitude of the mayor.
Even some notable venture capital houses, such as Index Ventures, Octopus Ventures, Balderton Capital and Hoxton Ventures, still place their eggs in London’s basket, particularly when it comes to fintech.
IBS has previously reported on an array of companies making moves out of England, but some of this year’s reports differ with these predictions, with a large surge in fintech investment since the start of 2017, a recovery since the referendum.
The UK’s tech sector still drew more investment than that of any other European country in 2016, according to London & Partners, the mayor of London’s promotional company. Not everybody is as optimistic. Hinrikus stated that he wouldn’t choose London to set up a company’s HQ because of Brexit.
Research by Saxo Payments has revealed that half of payment professionals are planning to change financial partners ahead of Brexit, and more than a third say they are considering moving UK-based operations.
Some other companies are also getting cold feet about London. According to the Financial Times, the biggest US banks including Goldman Sachs, JPMorgan Chase, Bank of America, Citigroup and
www.ibsintelligence.com | © IBS Intelligence 2017
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