Innovate Finance, the membership association for global FinTech, today called upon the UK Government, as well as political parties across the spectrum, to support its FinTech Election Pledge.
The United Kingdom’s digital sector is at the heart of the UK economy driving growth, innovation, competitiveness and productivity across the nation. The UK’s digital economy accounts for 16% of UK domestic output, comprises 3 million workers, and between 2012 – 2016 attracted more venture capital (VC) and private equity investment than any other European country, at £28bn.
At the heart of this digital revolution, stands the UK’s thriving Financial Technology (FinTech) sector. In part driven by progressive policy decisions supporting competition and innovation in financial services, the UK FinTech sector now contributes £7bn to the economy and employs over 60,000 people – from engineers, to computer scientists and mathematicians.
However, our world-leading position in FinTech is far from assured. The UK is going through a period of enormous political, social and economic change, and data on the UK FinTech sector in 2016 has shown this to be the case. Whilst VC investment in global FinTech rose to $17.4bn last year (an increase of 10.9% from 2015), over the same period UK FinTech saw a 33.7% decline in investment, to $783m.
Although the United Kingdom continues to remain internationally competitive, ranking 3rd globally for investment in FinTech, the UK must continue to remain open to the talent, ideas and capital which underpin and strengthen our digital economy.
It is for this reason that we call upon the Government, as well as political parties across the spectrum to take action to ensure we continue to build a more innovative and entrepreneurial country, by supporting this FinTech Election Pledge.
- To Attract Global and Develop Local Talent
The UK’s FinTech sector relies heavily on a highly skilled, and internationally diverse workforce. Indeed, much of the talent which underpins UK FinTech is global in nature, for example our own research shows that 30% of Innovate Finance’s (non-institutional) founders are non-British. This trend is not confined to UK FinTech, with one in five of the digital economy’s 3 million workers born outside the UK (with a third of those from countries in the EU).
If we combine this with the lack of STEM skilled workers in the UK, which represents an annual shortfall of 40,000 according to the Campaign for Science and Engineering, with only 14.4% of those in STEM occupations being women, there is a clear mandate to act.
Innovate Finance would therefore like the Government, as well as political parties, to pledge that we have an efficient visa system, immigration policy, and highly skilled domestic workforce – that continues to prioritise both local and global talent. This includes but is not limited to: ensuring visa requirements do not adversely affect capitally constrained startups; utilising technology to fast-track visa applications; and on local talent – emphasising the importance of plugging our STEM skills shortage; and moving to ensure basic digital, numeracy and literacy skills are provided across the educational spectrum.
- To Create a Deeper, More Connected Investment Environment
Whilst the shifting macro-economic environment has posed some challenges to the continued growth of UK FinTech (see above figures), there are also opportunities for the UK political leadership to instill a more dynamic policy-making agenda to support investment into the sector.
Parties must therefore ensure continued access to capital and markets, driving access to finance at all stages of companies’ growth cycles, incentivising investment from Corporate Venture Capital (CVC), pension funds, and providing continued clarity over tax investment schemes (such as EIS and SEIS). The UK FinTech ecosystem is at a critical juncture, and therefore as we transition away European funding frameworks, such as the European Investment Fund (EIF) (which between 2011- 2015 committed €2.3billion to 144 UK based venture firms) more will be needed to create a healthy capital ecosystem, which provides the engine for our digital economy.
- To Transform the Nature of the State with 21st Century Regulation
With the growth of the digital economy, and the increase in the use of data within financial services, regulation too must become more effective, whilst balancing the interests of promoting innovation with consumer protection, and financial stability. Accordingly, the rise of RegTech or “Regulatory Technology” could provide a potentially transformative tool in re-designing financial regulation for the 21st Century.
A central part of any industrial strategy must therefore include an appreciation of digital infrastructure, and in doing so we must reimagine institutions and regulators in light of the digital economy. Accordingly, we would encourage all regulatory bodies to put technology and innovation at the heart of their operations, and call upon the UK Government and political parties to commit regulators to a digital transformation, gearing investment towards growing their technological understanding, infrastructure, and ability to encourage responsible innovation.
TechUK & Frontier Economics, The UK Digital Sectors After Brexit, Jan 2017
 Tech City UK, Tech Nation 2017, March 2017
 Chancellor of the Exchequer Philip Hammond, Speech at inaugural International FinTech Conference, April 2017
 Innovate Finance, The 2016 FinTech Investment Landscape, Feb 2017
 Innovate Finance, Autumn Statement Submission, Oct 2016
 TechUK & Frontier Economics, The UK Digital Sectors After Brexit, Jan 2017
 Campaign for Science and Engineering, Improving Diversity in STEM, May 2014
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