Historically, the UK was renowned as an exporter of world class products and popular commodities. This was something that changed gradually throughout the ages, however, as nations such as China and India established themselves as low-cost manufacturing hubs and the age of outsourcing began in earnest. Now, manufacturing and industry accounts for just 21.4% of the UK’s total GDP, with financial services delivering an incredible 77.8/%
While London may now be established as the world’s financial and fintech capital, however, this dominance has been sorely threatened by the much-maligned Brexit vote. Even before the referendum was held on June 23 of last year, the capital’s most prominent fintech leaders were thought to be considering various exit plans in the event of a leave vote, while other nations were already preparing to assume London’s mantle as the world’s leading, fiscal hub.
In the immediate aftermath of the Brexit vote, these precautions seemed well-judged. Currency experts FX Pro reported that the value of the pound plummeted to a 31-year low within hours of the vote, for example, while many British firms and service providers started to consider relocating outside of the UK.
Almost simultaneously, Berlin’s digital entrepreneurs and financial experts declared their interest in disposing London as the world’s fintech centre, pledging new innovations while also encouraging UK firms to relocate to the German capital. Given this and the desire of prime minister Theresa May to pursue a so-called ‘hard’ Brexit (which will remove the UK from the single market entirely), London’s time as a global fintech innovator appeared to be at an end.
With the government supposedly just weeks from formally triggering Article 50 and beginning official exit negotiations, however, the outlook appears to have softened. Sure, London may have been severely wounded by the Brexit vote, while it still faces a huge fight if it is to retain its status as the dominant, fintech player. The sector has been boosted by technology and the regulators at the Financial Conduct Authority (FCA) during the last seven months, creating genuine hope that the UK’s capital can continue to lead innovation in the fiscal marketplace.
If we look at bitcoin and blockchain technology, for example, we have seen these innovations thrive in 2016 on the back of stringent and more clearly defined guidelines that have been laid down by financial regulators. This has empowered firms who aim to harness blockchain technology and leverage its full potential, while also leading to the emergence of the world’s first, digital ledger.
Similarly, the UK’s so-called ‘Sandbox’ project has also helped British fintech firms to raise capital and bring their ideas to market quicker, by providing a progressive think-tank in which some regulations are waived and concepts can be bounced off officials. This type of experimental space has helped London’s fintech leaders to cope with the fall-out of the Brexit vote, while ensuring that they are still able to raise funds and retain their competitive edge in the financial marketplace.
London will always be one of the world’s most iconic capital cities, but whether or not it continues to serve as the fintech capital has yet to be seen. It has responded well to the challenges created by Brexit so far, however, while technological and regulatory innovations have enabled London-based firms to retain their competitive edge. With this in mind, the only remaining question is whether not such an edge can be sustained once the UK has finally left the EU and must make its own way in the world.