Could Brexit Hurt London’s “Global Capital for FinTech” Status?
When those of us on this side of the Atlantic think of FinTech headquarters, it’s Silicon Valley that most likely comes to mind. However, in the global scheme of things, it’s actually London that reigns supreme. As Aaron Klein of Fortune recently noted the United Kingdom is home to over 60,000 FinTech jobs and has regulatory policies in place that are so attractive to FinTech firms that Ernest & Young ranked them above California, New York, and Singapore. For these reasons and more, Harriet Baldwin, the U.K.’s Economic Secretary, declared London to be “the global capital for FinTech.”
But then came Thursday, June 23rd and the infamous Brexit referendum vote. With the shocking result that amounted to the United Kingdom deciding to leave the European Union, markets around the world were suddenly plagued with uncertainty. As a result, just as there are now many questions about the U.K.’s future overall, many are wondering if London will still be the FinTech capital it once was.
There are several reasons why a FinTech firm might want to avoid starting up in London for the time being. For one it seems no one quite knows what trade agreements the U.K. will have with Europe or even the United States when all is said and done. Additionally few startups are likely inclined to enter an economy that could possibly be headed for a recession.
While it does stand to reason that those thinking of heading to London to start a FinTech company might think twice, the truth is there may actually be opportunity in doing so. For example marketplace lender Lending Club was able to thrive despite launching just prior to the 2008 banking crisis. When the too-big-to-fail banks began to cut back dramatically on the number of loans they were issuing, Lending Club, Prosper and others were there to fill the gap. Although it’s hard to say definitively, one could argue (and I would) that this seemingly unfortunate timing actually worked to the companies’ and the entire sector’s advantage.
To be fair at this point nearly everything written about what the Brexit will mean is just speculation. However, with Prime Minster David Cameron set to be replaced by Theresa May on July 13th, we may soon start to actually get some of these big questions answered. Still it will be awhile before the real impact of the vote and presumable exit from the E.U. are felt, quantified, and studied. Only then will we truly know if London and the U.K. will be able to retain their title of FinTech capital of the world.