London’s status as the world’s dominant fintech capital is at risk because of poor regulation of the sector that could lead to an exodus of founders, a survey reveals today.
Fintech has thrived in the capital over the last decade feeding off London’s twin strengths as a global financial centre and Europe’s leading tech cluster.
It has resulted in the creation of rapidly growing fintech unicorns such as Revolut and Wise, with the area around Silicon Roundabout on Old Street and in Shoreditch counting as one of the world’s top fintech hubs.
But according to an annual survey of fintech founders there is increasing disenchantment with the regulatory infrastructure in the UK that has contributed to four out of ten saying they have considered relocating abroad.
The survey, sponsored by the leading wealth management and accountancy practice Evelyn Partners, found that not a single founder reported the UK’s regulatory environment to be “excellent”, with 39% describing it as “poor” or “awful”. Nearly 20% said regulation and regulators are one of their main barriers to growth.
A third of founders report that difficulty with access to funding is their key constraint in growing their innovative businesses, and a key driver of founders considering relocating abroad – particularly to the US and Middle East.
Despite those concerns there are still high levels of optimism among founders with more than 80% expressing a confident outlook for their business over the next 12 months. Encouragingly 27% of founders believe the UK is the world leader in fintech, up from 19% last year)
This year’s survey also shows founders are divided on the new Government. One fifth of respondents said that Labour’s victory will result in a better environment for fintechs, whereas just over one quarter said it would get worse – with the majority unsure or believing it would make no difference.
Seb McDermott, co-chair of Fintech Founders and Co-Founder of Koodoo, said: “The UK remains an attractive place to start a business, but if founders don’t feel supported in their growth journey, they will look to greener pastures. Among many other things, founders create jobs and attract much needed investment into the UK, which will be critical to achieving the government’s growth ambitions. Their voice needs to be heard if the UK is to remain a leader on the global fintech stage.
Fintech Founders looks forward to working closely with policymakers to create a strengthened policy environment for entrepreneurs.”
Tom Shave, Head of Growth at Evelyn Partners commented: “It’s extremely worrying that fintechs feel their voices aren’t being heard by policy makers and also that such a large number of founders have considered leaving the UK. Fintechs are instrumental in driving growth in the UK economy, but need the support of Government to convince them to invest in scaling their operations and hire more staff.
“By investing in supporting the fintech sector and helping fintech companies access the funding they need to grow, there is a golden opportunity to create further jobs which in turn will fuel the economic growth that the UK so desperately needs. The UK risks being left behind by other countries competing for the crown of fintech world-leader if urgent action isn’t taken by the Government to give further support to the sector.”
The Fintech Founders Annual Survey has been running since 2019 with more than 450 founders polled. Members have founded companies ranging from early stage start-ups through to more than ten unicorns. Members have founded companies operating in a broad range of areas, including banking, lending, payments, crypto, investment and many others.
Established in 2016, the group operates in the interests of all fintech founders and aims to create an opportunity for real conversations, and better collaboration amongst entrepreneurs, startups, government, regulators and across the financial services.
Earlier this month the organisation wrote to Rachel Reeves urging the Chancellor not to alter capital gains tax “in a way which will reduce incentives for entrepreneurship and which harms UK competitiveness”.
The letter was signed by 66 founders and chief executives.
