Hunting for Unicorns

The Kalifa review and UK fintech competitiveness

The forthcoming Independent Fintech Strategic Review, led by Ron Kalifa, promises to light the touchpaper for the UK’s fintech sector. At present, the sector is worth £7 billion to the UK economy and employs over 60,000 people across the country.

The UK has long enjoyed a world-leading position, with companies able to readily access key talent and finance against the backdrop of a pro-services framework. Whilst these factors still resonate, the uncertainty caused by Brexit, a lack of direction on fostering a specific, pro-fintech environment and a failure to realise the full potential of ‘Silicon Roundabout’ means that the UK finds itself at a crossroads. In the months ahead, we expect to see UK policymakers and market participants focus their effort on four streams of activity that will shape the future of the UK as a leading international fintech hub.

1. Retaining and attracting talent

A core component of the Kalifa review will revolve around access to talent. The post-Brexit situation will undoubtedly have knocked confidence in the ability of firms to quickly secure talent from abroad. There is a risk that changes to the UK’s immigration system may inadvertently stifle the ability of UK firms to attract and recruit those key to the success of fledgling start-ups. Other markets with growing fintech sectors have utilised tech-specific visas and it would be remiss for the UK to not consider their value.

2. Closing the skills gap

Whilst we are fortunate to have world beating universities and research facilities, this does not appear to translate to the wider economy. According to the latest global skills index, the UK ranks 19th, 23rd and 24th for business skills, tech, and data, respectively. With an estimated 5 million workers needing retraining or upskilling as technology further enhances the workplace, the UK must double down on the skills agenda to ensure long-term success.

3. Building a competitive regulatory framework

Then there are the regulatory fundamentals that will determine the success of a fintech start up. The review will likely call for a formalised investment fund rumoured to be in the region of £1 billion. Alongside a reduction in the minimum stake required to be floated from 25% to 10%, these could provide the foundations of an influx of capital to better support and nurture UK businesses from start-ups to unicorns.

4. Defining a compelling narrative

Ultimately, the Kalifa review will call for the need to instil a positive, dynamic and engaged narrative around the UK’s fintech sector. Post-Brexit, the UK’s fintech sector has demonstrable potential to act as a key differentiator when competing on the world stage. The review will undoubtedly position the UK market as ripe with opportunity for growth and opportunity, but the need to establish that confidence in the sector cuts both ways.

So, what now?

Historically, policies have been influenced by the incumbent financial institutions with even the most successful fintech firms having very little say in the conversation. As the UK begins to set out its stall, the fintech sector is being recognised as a long-term strategic priority for the UK government with this review signalling that policymakers are in need of industry input to facilitate its growth. Now is the time to seize the opportunity to engage with regulators and policymakers, and to shape the sector to your advantage.

With offices across the world’s largest financial centres, Hume Brophy is uniquely positioned to help firms navigate challenges and opportunities ahead. The rise of the start-up and the allure of the unicorns mean that the financial sector is no longer dominated by the big players, and the chance for greater democratisation across the regulatory space looms larger than ever.

If you would like to hear more about the issues currentlyshaping the policy and media agenda and how to best engage with these stakeholders, contact us onUKteam@humebrophy.com