Staff Writer AccountingWEB
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Kalifa urges £1bn fund to fuel UK fintech growth

A £1bn growth fund was the centreprise of Ron Kalifa’s UK fintech review published today by the Treasury. Maddy Christopher summarises key recommendations ahead of tomorrow's Budget.

26th Feb 2021
Staff Writer AccountingWEB
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UK fintech review: The City of London, financial district of the Metropole, just after sunset with illuminated buildings and cloudy sky, United Kingdom
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At last year’s Budget, the Chancellor ask ex-Worldpay CEO Ron Kalifa OBE to carry out an independent review of the UK’s fintech industry and suggest ways to boost the sector and create jobs. 

Today the review was released in full, including proposals for a new fintech scale-up visa regime, a “scale box” for growing firms and changes to UK listings rules, and for 10 clusters to act as hubs for innovation.

The review is a key part of Chancellor Sunak’s plan to put the UK at the centre of the map for financial services businesses.  The report’s objective is to boost trade, create highly skilled jobs and extend the country’s competitive edge over other leading fintech hubs

“Fintech has the power to change lives, both in terms of job creation and better wages that are so essential to our recovery; and making financial services more accessible and relevant to people’s lives,” said Kalifa.

“With the right reforms that encourage entrepreneurialism, investment and make it easy to attract and invest in talent, Britain can usher in a period of dominance that can help us build back better from Covid-19.”

Other aims highlighted by Kalifa include:

  • Improving UK listings rules with free float reduction and dual-class shares that would give founders more control after taking their companies public

  • Creating a £1bn fintech growth fund to help firms grow independently

  • Establishing a private sector-led Centre for Finance, Innovation and Technology to support national coordination and fintech growth across the UK.

The cluster proposal would establish areas around the country that would receive funds from local enterprise partnerships. Designed to break London's hold on the UK fintech sector, potential locations have been put forward including Scotland’s central belt and Wales.

“The UK has a robust and vibrant fintech community, with a very forward-thinking regulator,” Capitalise CEO and founder Paul Surtees told AccountingWEB. “We must not take that for granted and this report sets out recommendations that will if implemented not only defend the community but support it to become the global leader with all the spoils from inward investment, job creation and a fairer more, equal financial system for all.”

Recommendations at a glance: Kalifa’s five-point plan

Policy and Regulation

  • Deliver a digital finance package that creates a new regulatory framework for emerging technology

  • Implement a “Scalebox” that supports firms focusing on scaling innovative technology

  • Establish a Digital Economy Taskforce (DET) to ensure alignment across government

  • Ensure that fintech forms an integral part of trade policy

Skills

  • Retrain and upskill adults in support of UK fintech by ensuring access to short courses from high-quality education providers at low cost

  • Create a new visa Stream to enhance access to Global Talent for fintech scaleups

  • Build a pipeline of fintech talent by supporting fintech scaleups to offer embedded work placements to Further Education and Higher Education students and Kickstarters

Investment

  • Expand R&D tax credits, Enterprise Investment Scheme and Venture Capital Trusts

  • Unlock institutional capital to create a £1bn Fintech Growth Fund of  to act as the catalyst in developing a world-leading ecosystem

  • Improve listing environment through free float reduction, dual-class shares and relaxation of pre-emption rights

  • Create a global family of fintech indices to enhance sector visibility

International

  • Deliver an international action plan for fintech

  • Launch an international “Fintech Credential Portfolio” (FCP) to support international credibility and increase ease of doing business

  • Drive international collaboration through the Centre for Innovation, Finance and Technology, and launch an International Fintech Taskforce

National connectivity

  • Nurture the high growth potential of the top 10 fintech clusters

  • Drive national coordination strategy through Centre for Innovation, Finance and Technology

  • Accelerate the development and growth of fintech clusters through further investment such as R&D

“We have seen during Covid a global equalisation of the developer community with hiring becoming fiercer than ever, so the fast track visa scheme is particularly welcome, especially given Brexit,” said Surtees. “UK Fintech is heavily supported by fantastic European entrepreneurs.”

Why UK fintech?

Over the last decade, the Financial Conduct Authority’s (FCA) pro-competition mandate provided a “more nurturing regulatory environment” for UK fintechs. In 2016, the FCA launched the world’s first regulatory sandbox, which was subsequently replicated abroad by regulators looking to follow the UK’s lead.

The Bank of England and FCA’s New Bank Start-up Unit offers additional support and advice for firms looking to gain a banking licence. 

Key achivements for the sector over the past five years include:

  • The UK represents 10% of global market share and £11bn in revenue. “The UK is a dominant force in fintech” affirms the review.

  • £95bn total tech spend by UK financial services firms in 2019.

  • SMEs and corporates are all keen users of fintech. UK citizens are becoming digitally active and 71% are now using the services of at least one fintech company.

  • Investment into UK fintech stood at $4.1bn in 2020 – more than the next five European countries combined.

“Britain’s fintech sector [has] a crucial role to play in supporting the economy as we look to recover from Covid-19, “ commented iwoca CEO and co-founder Christoph Rieche.

“Small businesses are the backbone of our economy – many have been hit hard by the crisis. I admire the resilience of so many business owners that haven’t thrown in the towel but found ways to keep their businesses going, and in many cases found new opportunities. I am proud that we could play our part by providing the necessary financing.

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