November 6, 2017 | Written by: IBM Staff
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As Brexit inches closer to its culmination date of March 2019, one unanswered question from the impending exit from the EU is will London still be seen as the ‘capital of Fintech” in Europe?
It’s no secret that London has held the crown this burgeoning industry due to its startup-friendly regulatory environment (i.e. the Regulatory Sandbox), the massive investment dollars into British fintech start-ups ($564 million in the first half of 2017), and generally being the European ground zero of financial industry recruiting and retaining top talent. But what happens in the uncharted economic waters of Brexit? While there are many questions currently weighing on the British economy due to Brexit, one more to add to the list is will fintechs leave en masse to a more stable geographic location with less uncertainty?
To put some minds at ease, a new study from international ratings agency Early Metrics reports that despite the uncertainty of Brexit and for the “medium term,” London will likely remain as the European capital of fintech. “However, amidst the long-term Brexit uncertainty and competition from elsewhere, London remains an attractive hub for talent and a dense cluster of financial institutions” states CEO Antoine Baschiera. Early Metrics, who specializes in providing ratings of start-ups and small to medium-sized enterprises, conducted an analysis of 1,500 European fintech firms and found that despite leadership in the industry seeing a direct threat from Brexit, it’s not a strong enough challenge to unseat London as the undisputed leader in European fintech. “The UK is currently facing its most serious challenge so far as the fintech hub of Europe. Although it’s too early to draw any definitive conclusions on what impact Brexit will have, companies are already assessing the implications of fundraising, talent acquisition and talent retention”, Mr. Baschiera continues.
London has already established itself as a European and a global leader of fintech. As of 2016, London has the largest number of top 50 international fintech firms, according to a study by KPMG and H2 ventures. Out of the top 50 firms, 17 were located in London, more than any other city in the world, including fintech leaders New York and San Francisco.
For London to lose their crown, it will take a larger investment than already has been made in London to peel away these top firms to a new European city.
Baschiera comments “Positioned as the gateway between the U.S. and Europe, the U.K. already possesses expertize in successful fintech ventures and the capability to continue this trend, demonstrated by the $564 million invested in fintech start-ups this year alone.” Firms have spent large amounts of capital to establish themselves in the London marketplace, and they are not yet prepared to abandon those capital investments. While other European cities like Zurich, Amsterdam and Berlin have prospering fintech communities, they are still unmatched to London in size and location.
Early Metrics’ fortune-telling may calm some fears about a London fintech exodus, a word of caution from Mr. Baschiera is also embedded into his prediction as well: “London will maintain its fintech influence, if this landscape does not change.” While Brexit in 2016 was a shocking and unlikely outcome in a year of shocking and unlikely outcomes, it still may be too early to correctly forecast the post-Brexit fintech environment. Londoners are hoping Early Ratings is accurate in their prediction, but as we learned with Brexit itself, anything can happen.
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