Fintechs crave "stability" as mini-budget reversal is digested

The fintech industry yesterday said “stability” was key, as it digested the UK Government’s high-profile reversal of its mini-budget.

Announced by new Chancellor Jeremy Hunt, the reversals included the scrapping of the basic range of income tax from 20p to 19p from April and that support for household and business energy bills would now only be reduced until April, when it would be reviewed. 

The changes, which sent the value of the pound higher against the dollar while Government borrowing became cheaper as interest rates on government bonds fell, were broadly welcomed by investors.

Victoria Scholar, head of investment at Interactive Investor, said: "Jeremy Hunt's focus on reassuring the markets and reinstating confidence appears to have worked so far with gilt yields trading lower and sterling pushing higher."

But Scholar pointed out that questions would remain until Hunt gives the details on 31 October as to how the Government plans to cut spending to fill the multi-billion pound budget shortfall.

While the recent volatility in the markets has been damaging for businesses, the fintech industry is now hoping for a period of economic stability.

Russ Shaw CBE, founder of Tech London Advocates and Global Tech Advocates, pointed out the importance of economic stability to UK fintech.

Shaw told AltFi: “Today’s statement from the new chancellor was primarily focused on reassuring the markets and stabilising the economy.

“What the U-turns and reversed tax measures will amount to remains to be seen, but for any fintech business—and indeed any growing company across the UK economy—stability is key, and it’s the only way that we can reinstate a trading environment that inspires confidence amongst investors. 

“Fintech in particular has thrived off huge amounts of investment over the years, and if the new chancellor is able to create stable market conditions, we can be confident that trend can continue.”

Josh Levy, founder of Ultimate Finance, said many of the various government tax cuts—such as the plan to cancel the rise in corporation tax next year—which have now been reversed were not demanded by businesses so their impact will be “short-lived”.

But Levy told AltFi it was “vital that the government can get to work on supply-side reform to address the real issues”.

He added: “The various U-turns can’t undo the damage done to the UK’s credibility nor the acceleration in forward interest rate expectations that have had such implications for money markets and, ultimately, households and businesses. 

Levy also hit out changes to the energy price guarantee.

“The underlying economic challenges remain and tough trading conditions will persist, whilst changing the nature of the energy price guarantee feels like a backward step for confidence levels at exactly the wrong time and will continue to cause anxiety over the months ahead.

"Lending markets and the customers we serve need a stable environment to operate in and it still feels like we’re some way from reaching this.”

On the income tax reversal, PensionBee CEO Romi Savova reiterated the importance of market stability but said it was “disappointing” to see the government row back on the income tax cut.

Savova told AltFi: “Chancellor Jeremy Hunt’s fiscal statement hopes to deliver confidence and stability for public markets, which is important for all types of pensions.

“Scrapping the reduction of the basic rate of tax will retain the simplicity of pension taxation and tax relief.

"However, for many, including pensioners, it will be disappointing to see a core measure, designed to support savers during the cost of living crisis, has been pulled back.”