Brexit, Day 5. Despite there still being no clear answers or outlook and the fact that there couldn’t be more upheaval within British Parliament, cards and payments firms have little choice but to continue business as usual while they try to prevent a talent drain. Anna Milne writes
The pound having plummeted and a substantial chunk having been lobbed off the stock market; a bleak yet preferential scenario to one of the most disconcerting potential repercussions of the UK referendum result on EU membership- the threat of departure of talented staff. Ironic, given the driving argument of Leave’s campaign having been the influx of workers.
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Many UK-based businesses have expressed their concern over this potential outcome, saying their current non-British staff feel unwanted as a result of a vote to leave the EU and that fintech talent may be attracted to places such as Dublin, Berlin, Stockholm, Luxembourg, Geneva, which could replace London as a global fintech hub. Uncertainty may be enough to re-direct talent and investment away from the UK, regardless of whether or not the UK does break ties permanently with the single market.
London has a lot going for it: capital city status, a centre of finance, a preferential geographical location (including a favourable mid-position on the global timeline), as well as being home to three top ranking, globally renowned universities, and the home of a forward-looking regulator. It is no wonder the fintech scene has thrived here.
A recent survey by Tech London Advocates, an organisation representing about 2,700 of London’s tech sector, found 87% of its members polled want to remain in the EU. Three quarters of the survey respondents said if the UK left the EU, tech firms would be in a much more difficult position with regard to attracting investment.
The fact that large investment banks (JP Morgan, Goldman Sachs, Morgan Stanley, HSBC) are already announcing or heavily rumoured to be making plans to relocate staff and offices out of the UK means fintechs are likely to follow.
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By GlobalDataAndre Malinowski, head of international business at payment service provider, Computop, shared the following comment:
"The Brexit result could jeopardise the UK’s status as the preferred location for global companies to conduct their European business. London is the major financial gateway for Europe, and all of the biggest international banks use the city as their hub into Europe. Leaving the EU now raises the question regarding whether or not licenses issued by the European Central Bank will still be valid for a company operating in the UK. While existing arrangements may not be impacted, new ones likely will.
"Brexit will now force international banks to reassess their European operations as a whole. With the UK opting out of the EU, there’s a high chance it will move both transactions and jobs out of the UK. Banks may no longer have the right to provide services to other locations in Europe. Everything could be impacted – trading, investment, foreign exchange, acquiring, etc. All services that had been provided from London to the rest of Europe may become obsolete. While this may be good for other European cities, it would have a major negative impact on London, and ultimately would impact international merchants with UK-based operations too."
Graeme Risby, co-founder and CEO of HiyaCar, although overall optimistic re his car renting business in the sharing economy, said, "Friday’s news regarding the UK’s exit from the EU is very disappointing.
"This exit could potentially make recruiting more difficult when it comes to attracting the best talent which could be a challenge. This exit could also have a negative impact when it comes to raising investment for some UK companies as I’m sure overseas investors might shy away from the UK due to a lack of near term stability."
On the plus side, there are silver linings: tax breaks could be created for businesses in the event of a divorce from the single market by way of incentive to stay in the UK and indeed, if passporting rights are terminated, UK-regulated payments businesses could still set up a subsidiary in an EU country to continue to operate their services. It just means rather an extra amount of admin but is not by any means impossible.
The fintech start-up industry is by definition fast-paced and adaptable. This could be argued in two different ways. Their combative spirit could be anticipated to weather the storm, adapt to a changing environment and plough on, or they could just as easily cut their losses, up sticks and relocate to higher ground. Let’s hope it’s not the latter.
