Last month, the UK triggered Article 50, marking the start of our two-year divorce proceedings from the European Union. Since last June's vote, the Pound has fluctuated, prices have increased and companies have threatened to relocate but the true consequences are yet to be realised.
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Ahead of next month's WIRED Money event in London, we spoke to three leaders in the finance sector about their predictions for what a post-Article 50 future holds. Key concerns throughout our conversations included continued access to funding and talent, and what CEO of app-only bank Monzo, Tom Blomfield, calls "harmonised regulation".
“Today we cover all regions we are operating in – UK, Germany, Poland, Spain – from our London headquarters,” said Christophe Rieche, CEO and co-founder of iwoca, a credit platform for small businesses that offers loans of up to £100,000 and has around 10,000 customers. "This is possible because London offers deep pools of talent for native speakers across all levels of seniority and functions from developers, marketers, account managers to credit analysts. If we cannot hire people easily from these regions in London we will have to relocate some or all of our operations. Limiting the pool of talent will make it harder to find stars that enable us to become a global champion.”
In terms of funding, he says uncertainty during the negotiation process will make this access even harder. “We are relying on international investors to fund the growth of our business, today, nearly all of our equity funding comes from continental Europe.”
The impact on regulation is likely to be felt less severely for iwoca than others, says Rieche, because it involves credit. “Europe is a patchwork of local regulations when it comes to credit, therefore there is probably no immediate impact from Brexit.”
Elsewhere, changes to regulation at a European level could make it harder for businesses based in London to compete with those headquartered in EU countries.
“If companies domiciled in the UK don't have the same access to the single market in the future, it will be harder to build global champions,” Rieche continues.
Valdis Dombrovskis, the EU’s executive vice president, announced last month that the European Commission is considering ways it can regulate the fintech sector to bolster development in Europe.
“We need to be cautious in our approach, ensuring this new industry has space to grow,” Dombrovskis said at a meeting in Brussels. The Commission is considering new rules that would provide fintech businesses passporting rights to “expand across borders and operate anywhere within the EU’s single market”.
Losing out on this passporting will be one of the largest negative impacts of Brexit when it comes to regulation for businesses based in the UK, Tom Blomfield says. Whether or not it will make it harder for London-headquartered businesses to compete with others in the EU, Blomfield says he is unsure. “Time will tell.”
Uncertainty is not always bad news, however.
Brexit could introduce many opportunities for financial startups, particularly those focusing on regulation technology, or "regtech".
“It’s a huge opportunity for us,” Diana Paredes, CEO and founder of Suade tells WIRED. Read more: How fintech could be the key to surviving the Brexit fallout
Suade takes the complexity out of regulatory compliance for banks by helping institutions compare their operations to regulations and manage changes to adhere to those regulations. The uncertainty Brexit is predicted to cause will mean financial institutions looking to become compliant with changing regulations will need Suade more than ever. And, as technology can adapt quickly to changes in rules, it will become invaluable when regulatory changes are put into place.
That said, Paredes doesn't believe Brexit should be taken lightly from the point of view of a business headquartered in London, like hers. She also urges businesses like hers to try to maximise opportunities to lobby for positive changes.
“We will have to keep a close look out over the next few months” Paredes concludes.
Interested in learning more about the future of finance? Join us at WIRED Money in Studio Spaces, London on May 18, 2017. For more details and to purchase your ticket visit wiredevent.co.uk
This article was originally published by WIRED UK
