Anxious wait: Reeves announcing the steps the government will be taking to deliver economic growth in London. A series of warnings about public finances have raised concerns she will raise taxes in her first budget on Oct 30. — AP
LONDON: Executives of some of Britain’s most valuable and fast-growing financial technology (fintech) firms warn the Labour government that London could fall behind in the fintech world if the United Kingdom fails to address some of the industry’s key concerns.
Among these are the challenges they see with share listings and regulators’ speed in decision-making.
Of those who met Economic Secretary to the Treasury Tulip Siddiq were Revolut’s UK chief executive officer (CEO) Francesca Carlesi, Clearbank CEO Charles McManus and Zilch Technology Ltd boss Philip Belamant, as well as representatives from OakNorth Bank and Atom Bank, the people said, asking not to be identified because they are not authorised to speak publicly about the meeting.
Concerns over increases to capital gains tax, lagging relief for entrepreneurs, rules stifling growth and competition, as well as a lack of access to capital, were among the topics discussed, the people said. Siddiq said she would take their message to the Treasury, one of the people said, and agreed to another meeting with the fintech executives in the coming months.
“We want to embrace fintech,” a Treasury spokesperson said in a statement.
“That includes unlocking billions of pounds of investment in the UK economy through our pension review so that more innovative companies can access the capital they need to grow.”
The discussions point to the pressure Starmer’s administration is facing to deliver on its pro-growth election pledges as confidence in the economy dims.
A series of bleak warnings about public finances have raised concerns Chancellor Rachel Reeves is set to raise taxes in her first budget on Oct 30, even as both Starmer and Reeves gear up to court global capital at an investment summit.
Representatives for Revolut, OakNorth, Atom and Zilch declined to comment on the private meeting with Siddiq. A spokesperson for Clearbank did not immediately respond to a request for comment.
There’s a growing fear that the nation’s fintech industry, like other businesses, could choose to list elsewhere when they eventually decide to go public.
Considered one of the pillars of the UK’s economy, the sector has created 76,000 local jobs and could add £328bil to the domestic economy in the next five years if it remains a global leader, according to forecasts by trade body Innovate Finance.
Take, for instance, Revolut, whose valuation recently reached US$45bil in a secondary offering to give employees liquidity for their stakes, making it Europe’s most-valuable fintech.
In March, Carlesi said London was at risk of a growing drift of workers away from the city with Paris and New York competing to host promising finance startups.
Wise has been the most high-profile firm to list on the London Stock Exchange while many executives are mulling New York as an option.
“There’s a big race. If we really want to grow we need to be global champions, not national champions,” Carlesi said, speaking to an audience of industry executives and policymakers in Westminster before the private meeting with Siddiq.
“The question is, how do we start nurturing business to become global players, rather than having them go like somewhere else?” she asked.
Earlier in the summer, the Financial Conduct Authority unveiled new rules to jump-start an equity capital market that’s been moribund for years. The Treasury has supported those changes.
Still, chief executives of large fintech firms said that they were pushing for bolder reforms to boost the city’s appeal, including around enhanced incentives for research, better policies to attract global talent, alongside a friendly tax regime that supports employee stock options.
Meanwhile the UK government has made some recent announcements to aid early-stage startups, including extending two programmes that offer tax incentives to invest in early-stage businesses.
At the same Innovate Finance conference where Carlesi spoke, Siddiq told executives the government wants to have policy certainty to support long term planning.
“We know that helps you build your business, but also gives the certainty for investors to build essential capital that’s needed for a startup and scaleup,” she said.
This comes as businesses anxiously await a decision around raising capital gains taxes to as high as income tax, with a top rate of 45%, that would likely push some people abroad, including entrepreneurs and private equity executives, critics said.
Speaking on a panel at the conference, Zilch CEO Belamant said that he had been attracted by the UK’s policies for startups when he first co-founded his buy-now-pay-later firm in 2018 and founders were eligible for £10mil in entrepreneur relief.
Such support has since dropped down to £1mil, he said.
Belamant also pushed for policies that would encourage pension funds to increase holdings in British companies, adding they own less than 2% of such assets compared with 50% about a decade ago.
Last year, the Conservative government announced an agreement between nine of Britain’s largest pension providers to boost their investment in growth companies, a move it said could unlock £50bil if the rest of the industry followed suit.
Some of the executives, who have been lobbying for months around authorised push payment (APP) fraud rules that came into effect this week, again raised the issue of liability with Siddiq.
The executives have urged the government to bring Big Tech companies into sharing responsibility.
The minister acknowledged that a new approach was needed, some of the people familiar with the matter said.
While the Payment Systems Regulator is primarily responsible for addressing how to handle APP scams, Treasury ministers are considering how the government can improve its approach, according to a person familiar with the matter.
Investors have said losses from fraud liability could disproportionately impact the UK fintech sector, and increase the risk profile of UK payments startups. — Bloomberg
