Collaboration Forum Series 4: Optimism in tough times (Week-4)

The UK is poised to show its strength on the world stage. Just six weeks after Brexit, commentators believe the financial services sector will create opportunities for the economy and help banish gloomy headlines about leaving the European Union. That was the verdict from Protiviti’s Collaboration Forum on 11 February, which included speakers from UK Finance, the Financial Services Compensation Scheme and challenger bank Cashplus.

Companies in the sector employ 2.3 million people in the UK and two thirds of those are based outside of London. The growth of financial technology businesses – or fintechs, as they are commonly known – has also redefined banking and finance. There are 75,000 people in a mixture of fintech startups and more established names, which contribute more than £7bn to the economy each year. In the past 12 months, they have also received $4bn of investment, and continue to attract attention.

“The UK’s position is unique,” said Theo Murden, consultant at Protiviti. “It has a pool of world class talent, access to capital, and forward-thinking regulators. London is a financial services centre like New York, a policy and regulation centre similar to Washington D.C., and it has thousands of tech companies like Silicon Valley. It’s not easy to replicate.”

This melting pot of ingredients hasn’t gone unnoticed. Challenger bank Cashplus, which was recently awarded its UK banking licence, is funded by a private equity firm in Silicon Valley. According to its founder and chief executive Rich Wagner, the company’s investor-director – who is based over seven thousand miles away – believes London is the centre of the fintech world. Yes, you did read that right.

While the turbulence of Brexit and financial failure is hitting the headlines, it’s clear that long-term opportunities exist. There have been a record number of startups this year, as people begin to sow the seeds of their own futures. Consumer credit has been falling over the past 12 months and it’s well documented that some people have been saving money. The same goes for investors and frustrated entrepreneurs stuck in jobs that they no longer consider safe.

“Registrations at Companies House are up 20 to 25 per cent,” said Rich Wagner from Cashplus Bank. “It’s a number we track, because we command a 7 per cent market share of new startups in the UK. Why is this happening? Individuals in companies are concerned about their jobs. They are opportunistically setting up businesses. Because we are also seeing a record low in the number of those cards and accounts being activated. These people are prepared for whatever this economy creates, but they are waiting.”

This pent-up demand sits on the back of what the UK has already achieved in financial services. Its global position might have been rocked by the movement of people and technology to the continent, but its supporters are clear about its ability to bounce back. They say the focus should now move towards galvanising regulatory power, the growing number of startups, and the UK’s position in the eyes of international investors. With these ingredients in place, they believe life outside the EU will start to look clearer.

“The EU is very clear about reducing its dependency on the UK,” said Conor from UK Finance, “so what we would like to see is a prioritisation of regulatory reform and gearing up for a world where the UK maintains its global position. Because if it’s one thing this country does well, it’s international financial services. I don’t think the competition is Frankfurt or Paris. Europe wants to get there, but it is five, ten, fifteen years away from achieving that. The competition for London is most definitely New York and the Asian markets.”