How will the UK withdrawal from the EU affect London’s fintech
The United Kingdom EU membership referendum took place on June 23, 2016.
51.9 percent of the voters voted in favor of the Brexit. Markets responded instantly: worldwide stock markets crashed and the pound sterling reached a 31-year low rate against the dollar.
London, a hub for many startups and fintech initiatives could be considerably affected by the referendum’s outcomes. Basically, every bank and investment company is represented in London’s business district. Last year alone close to one billion dollars were invested in startups based in London, as century-old banks invested millions of dollars in newborn ventures.
An ideal ecosystem
The benefits of a uniform European regulation system combined with comfortable EU immigration policies brought the best programmers and entrepreneurs in Europe to London.
Now, London’s entire fintech ecosystem might be at risk following the decision to leave the EU. Regulation differences between Europe and UK could dilute London’s main edge and incentives – banks will suffer and startups dependent on them will be marred.
What people say
A survey conducted in London before the Brexit referendum showed that 87% of hi-tech employees and entrepreneurs in London oppose the Brexit. The main concerns expressed were difficulty to recruit competent employees and access clients in Europe, and also the concern that international companies will stay away from UK.
Niklas Zennström founder of Kazaa and Skype said to Blumberg capital that withdrawal from the EU will keep entrepreneurs like himself away from London. The decision to locate Skype’s headquarters to London, and not to Sweden, his homeland, was because of London’s convenience, its proximity to financial markets, and the fact that employees could easily travel throughout Europe.
It might not be as bad as it seems
Mike Laven CEO of Currency Cloud, a fintech company that develops payment engines, thinks London’s edge will not disappear so quickly: “London’s time zone is ideal and its financial history and expertise in currency trade will not evaporate overnight. Corporate infrastructure, commercial, legal, insurance, and brokers’ services have all developed over decades, alongside other resources allowing London to become a special place.” In Laven’s opinion it is Europe that fears being detached from London’s resources rather than the other way around.
A former advisor to the UKs’ Prime Minister David Cameron, who founded the political crowdfunding startup Crowdpac, says that disengagement from EU regulations will allow the UK to determine a much friendlier policy for entrepreneurs, as well as other policies that will encourage immigration of high-level professionals. Immigration of Muslims and cheap labor from Eastern Europe were amongst the reasons the British voted “leave”. Now, instead of cheap labor, UK will be able to afford talented and competent programmers from all over the world.
Saul Klein, a member of Index Ventures that had invested, amongst others in the Israeli ventures MyHeritage and Soluto, supports disengagement from the EU and claims that UK advantages over other countries are a great opportunity to “make lemonade out of lemons”. One of his associates put it in simple words: “Technology has no borders.”
* Based on Josh Dhokerker’s article in www.gadgety.co.il from June 2016.