Kwasi Kwarteng/HM Treasury
Political chaos is more than a distraction for the UK’s highest-growth sector
While innovation in finance is not dependent on political stability, it certainly helps. Fintech needs more consistency from government.
Fintech and politics have a long and entwined relationship. While founders and investors don’t necessarily need the government to innovate banking and other financial services, the UK's fintech ecosystem's next stage of growth needs consistent political support.
The current chaos in UK politics, therefore, is hurting one of the most important sectors of the economy owing to the volatility it causes.
The UK has now (or at least will very soon have) had six Chancellors of the Exchequer, one of the most senior roles in the government and the person in charge of all the country’s economic and financial matters, in just over three years.
Phillip Hammond, Sajid Javid, Rishi Sunak, Nadhim Zahawi, Kwasi Kwarteng and presumably - if the number of respectable media outlets are to be believed - someone else quite soon.
Zahawi lasted for two months. Kwarteng just 38 days.
It is the first time that the UK has seen such a high turnover of chancellors although the period between 1921 and 1924 saw five (Robert Horne, Stanley Baldwin, Neville Chamberlain, Phillip Snowden and Winston Churchill).
Between 1823 and 1828 the UK also saw five chancellors (F.J Robinson, George Canning, Charles Abbott, John Charles Herries and Henry Goulburn).
Today, not only does the UK’s financial footing look perilous owing to all the macroeconomic woes you know all too well but also from the market reaction to the latest ‘mini budget’, which was infact quite ‘maxi’. Pensions and bond markets have had one of the most torrid few weeks in living memory.
As Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, notes his promise to deliver a medium-term fiscal plan within two weeks did not reassure that the government was in control of economic policy.
“Liz Truss is still facing a rocky horror show of her own making, given that the UK is still hurtling back into a 1970s time warp. Even if this embarrassing reshuffle is accompanied with a fresh reversal of policy, as far as the credibility of the government is concerned, significant damage has been done.”
“There will be a long way to go and significant bridge building ahead before the UK risk premium disappears”.
Investment into the UK is key to supporting the UK’s fintech ecosystem, widely regarded as the most vibrant in the world.
More than that though is the boon of having a consistent cheerleader for fintech who can understand the complexities of long-burning regulatory reforms from open banking to removing the pensions cap and encouraging more institutional investment into venture capital.
While there is no suggestion any future Chancellor would not want to support the fintech sector, having a series of people take on the role makes implementing the necessary reforms needed for the future growth of the fintech sector more difficult and likely to be pushed down the agenda.
Let's see how long the next one lasts.