Brexit at boiling point in Commons, but fintechs work around uncertainties

Fintechs still attracted to the UK’s access to capital and strong legal system.

Brexit may be at boiling point in the Commons, but the fintech industry seems at ease with the biggest change to the UK’s global trading relationships since the Second World War.

Lee Rowley MP, chairman of the all-party parliamentary group on alternative lending, said the debate around Britain leaving the European Union “has been consuming everything for months now, we haven’t been able to focus on anything else”. The UK voted to leave the EU in a 2016 referendum.

The Conservative MP for North East Derbyshire added that in the House of Commons “even the most unconnected of issues are being forced back into Brexit”. Rowley was speaking at the sixth annual AltFi London Summit on Monday, which brings together an international audience of financial technology entrepreneurs, advisors and investors.

However, fintech professionals seem to be working around the uncertainty of how the UK will trade with Europe and the rest of the world for years to come.

Cristina Alba-Ochoa, chief financial officer of digital business bank OakNorth, admitted it had seen “delays in business investment” in the UK, but said the group was still performing well.

Mixed economic picture

This was borne out days after the conference, on Wednesday, when the London-based unicorn - a start-up valued at over $1bn - reported that its pre-tax profits tripled to £33.9m last year, adding it still has not experienced a single default since it was founded in 2015.

The wider economy presents a mixed picture, at least partly shaped by the shadow cast by Britain leaving the 28-member European bloc.   

Earlier this month, the Bank of England slashed UK growth forecasts to 1.2 per cent this year, the slowest pace since 2009. The Bank had predicted growth of 1.7 per cent this year as recently as November.

However, earlier this week the number of employed people in Britain again rose to a new record number of 32.7 million between November and January, according to official figures.

Also, public sector net borrowing, excluding state-owned banks, fell by £1bn in February to £200m, said the Office for National Statistics (ONS) today.

This represents the lowest February borrowing figure since 2017. Economists had expected net borrowing of £600m.

Rule of law

At the AltFi summit, Esme chief executive Richard Kerton said: “Undoubtedly the UK economy has slowed during Brexit. But there will be a bounce, the question is how strong will it be?”

He added: “So far the influence of Brexit on firms has been at the top end, Japanese firms pulling out of the UK. But how far will the effects of Brexit trickle down the SMEs? We are not sure.”

But perhaps Patrick de Nonneville, chief operating officer of small business European lending platform October, most succinctly expressed the UK’s pull, despite Brexit.

The former Goldman Sachs partner said: “People come to Britain for three things. Its access to capital. Its rule of law. And access to talent. Brexit only threatens talent, and even there it is unclear how big an effect it will have.”