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FinTech: What happens now with the City of London?

The City of London

London has made a strong effort to become the European capital of FinTech. Many start-ups, some Spanish, have found there the perfect place to blossom. But Brexit could neutralise many of its advantages.

28 june 2016

Only five months ago, the big business papers in Spain spoke openly about the unique interest of the City of London in fishing for talent in the emerging Spanish FinTech sector. Less reticent to renew itself than other environments, the financial capital has been the main pole of attraction for financial start-ups almost at a global level, with European talent, youth and entrepreneurship.

However, the victory of Brexit hangs a massive question mark on the City’s status – the FinTech sector is no exception. The EBA (European Banking Authority, the regulatory agency for European banks) is planning to leave the city; many private firms have expressed their intention to move part of their staff to France, Germany or Ireland.

«In the worst Post-Brexit scenario, Fintech firms would need new headquarters in another EU country».

This past week, before the referendum, the CEOs of several European FinTech start-ups expressed in Madrid their rejection towards a Brexit. From the stage of the international MoneyConf event, they warned that, outside the EU, British FinTech firms with business throughout Europe would have to ‘go through regulatory challenges, set up subsidiaries, restructure legal entities, agree a new licence, etc… It would be a huge problem.’ Other experts confirmed that ‘in the worst post-Brexit case scenario, FinTech firms would need new HQs in other EU countries.’

The London FinTech Week (which takes place in July) asked a while ago for an extensive report on the (possible) damages that Brexit could cause to the sector, including risk sources. The result? Predicted losses of up to five billion dollars throughout the sector and an exodus of firms towards the EU and the USA. They also drafted a list of ten negative consequences it would have on the FinTech sector, among them not entering the future Digital Single Market or losing competitiveness when it comes to attracting skilled human capital.

On the other hand, Downing Street has been seeking to strengthen the business of the City outside the EU regardless of the referendum result. Nearly a month ago, the FCA (Financial Conduct Authority) came to an agreement with the Monetary Authority of Singapore to launch a ‘FinTech Bridge’ between the two nations: a regulatory cooperation pact and information transfers between firms.

Can London maintain its influence from outside the European single market? Maybe, since the regulatory environment is still more permissive for start-ups and the British government is strongly committed to the sector. There is even a possibility that the United Kingdom never actually leaves the Single Market (and there’s no doubt the financial sector lobby will be another piece of the current political mess when negotiating). But, at the moment, the uncertainty is pushing many to look towards Europe.