The UK should overhaul its listings to boost its $ 15 billion post-Brexit fintech sector
Monzo and Starling banking apps icons on a smartphone.
Adrian Dennis | AFP via Getty Images
LONDON – Britain should reform listing rules and visa applications to allow its £ 11bn ($ 15.3bn) fintech sector to thrive post-Brexit, a government-commissioned review said Friday.
The UK is one of the world’s leading players in fintech and has attracted $ 4.1 billion in venture capital investments last year, according to industry association Innovate Finance. It’s home to several fintech unicorns – private companies valued at over $ 1 billion – including Checkout.com, Revolut, and Monzo.
The review, led by former Worldpay boss Ron Kalifa, contains a number of notable proposals, including: the creation of a new expedited visa process to attract international fintech talent; a £ 1 billion startup fund backed by institutional investors; and a relaxation of listing rules to encourage late-stage fintechs to go public.
“This review will make an important contribution to our plan to maintain the UK fintech crown, create more skilled jobs and provide better financial services to people and businesses,” said Treasury Secretary Rishi Sunak.
Kalifa said: “We have to maintain our start-up culture, but it is also crucial that we support our high-growth companies in becoming global giants.”
The government has hired Lord Hill, the former EU Commissioner for Financial Stability, to conduct a review of the UK listing regime. Prime Minister Boris Johnson reportedly met with executives from Deliveroo, Revolut and other tech firms late last year to persuade them to list in London.
Kalifa’s report suggests reducing the proportion of stocks in the hands of public investors to avoid watering down the early supporters of fintech startups, as well as a “gold stock” or two-tier stock structures that allow founders to do so would keep control of their businesses and protect against hostile takeovers.
The call for listing reform is particularly timely as a number of firms including Deliveroo, Wise and Darktrace are scheduled to debut later this year. In the fintech space, several companies – including Revolut, OakNorth, and Checkout.com – have been surrounded by IPO speculation as their valuations soared to billions of dollars.
“We encourage companies to join the public markets,” Charlotte Crosswell, CEO of Innovate Finance, told CNBC.
“As someone who has been in public markets for most of my career, I can’t remember the pipeline being that good for technology and fintech,” added Crosswell, who previously worked for the Nasdaq and London exchanges.
The review also calls for an increased focus on other regions outside of London that are dominant in terms of investment, as well as a center for finance, innovation and technology to drive international collaboration.
Fintech could help boost the UK financial services sector after Brexit. European financial centers have benefited in the weeks following the UK’s end of EU regulation on December 31st. Amsterdam, for example, saw an increase in the number of deals it booked, while a large proportion of euro-denominated derivatives deals left London for New York.
“Given the tremendous amount of work that goes into getting new players into the market, it’s important that the right steps are taken to help these fintechs scale as well,” said Nick Lee, director of regulatory and government affairs at OakNorth, across from CNBC.
“After the UK leaves the EU, we have the opportunity to create more proportionality in the financial services sector and regulatory environment so that successful UK fintechs and new banks can continue to scale and grow effectively and compete with larger incumbents,” added Lee.
Kalifa’s recommendations have been communicated to Sunak, who will use the review to decide on policy changes.