A no-deal Brexit has been dubbed ‘chaotic and severe’ by an updated 30 page report entitled the ‘Cost of No Deal Brexit Revisited’ by think tank The UK in a Changing Europe, raising two concerns for financial services as the UK moves out of the European Union.
The first revolved around the question of market access with the loss of passporting. This will require firms to establish off-shoot entities within the EU27, although the report highlights it will be a “lengthy and complex task” that, if not implemented in time, could accelerate off-shoot efforts and result in job losses.
The report also highlighted that the UK’s financial services sector would continue to operate with “regulatory or supervisory equivalence”, although the government’s outline for enhanced equivalence seems remote in the event of a chaotic Brexit.
The concern over enhanced equivalence may very well leave the UK’s financial services “with a growing sense of unease”, according to CEO of Innovate Finance, Charlotte Crosswell in a recent statement.
“For this sector to continue to thrive and succeed,” said Crosswell, “shared access to cross-border data, sources of capital funding, and international skills and talent are all required.
“Without such access, many tech businesses – especially those start-ups that are scaling the success of UK fintech – will struggle to maintain the impressive growth we have seen, putting jobs across the technology and finance sectors at risk.
“A no-deal Brexit presents a clear challenge to the continued short term success of UK fintech, as well as placing at risk the long term impact on UK innovation.
“Innovate Finance calls for the UK Government to urgently take the steps necessary to ensure the maximum possible practical advice is provided to ensure continuity for UK fintechs as well as consumers of financial services,” said Croswell.
On the other hand, the UK’s fintech scene may be kept alive and kicking by consumer appetite for innovation.
New research by the Prepaid International Forum (PIF) suggests an increase in the use of tech-based financial services by the UK’s general adult population, rising to 42% compared to 14% in 2015. In terms of mainstream fintech adoption, the UK comes out on top in Europe and third globally behind China (69%) and India (52%).
Diane Brocklebank, spokesperson for PIF, said: “This is being driven by increased dissatisfaction with mainstream financial services and a desire for greater innovation and flexibility, particularly amongst consumers looking for lower costs and fees as well as smartphone accessible products.
“The UK’s status as a global player is therefore crucial to it continuing to be seen as a key market for such investment. To maintain this, it must continue to be a positive environment for innovation with a supportive regulatory environment and strong skills base.”
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