London’s thriving fintech community has a lot to lose from Brexit, which will cut it off its direct access to the markets in Europe, property investor BrickVest says.
Commenting on the implications of the Leave vote for UK fintech, BrickVest CIO Thomas Schneider told AltAssets investor appetite, new startup formations as well as new deals are all bound to drop in the next few years.
He said, “Regulation is key for conducting business and having the flexibility to innovate in fintech, especially in the fast-growing payments segment of the market.
“At the moment, if you are licenced with the FCA you are allowed to operate anywhere in the EU, and currently the FCA offers the best working proposition for fintech businesses.
“London has the perfect ecosystem and people who understand the needs of the companies very well.
“However, it is likely to quickly lose that position as UK’s access to the common market in the EU is blocked.”
UK’s decision to leave the EU has been characterised as “seismic” and “momentous” and it seems it will have wide-reaching ramifications for the startup ecosystem in the country.
More than 40 per cent of Europe’s startups valued at $1bn are based in the UK, according to the FT, and most of them are “shell-shocked” by the referendum result.
Schneider told AltAssets, “Following the Brexit, the UK would end up being a tiny market, relatively isolated from the rest of Europe.
“Both fintech companies and their investors would have to decide whether to stay in that tiny market or relocate to an EU country which would provide them with a lot more opportunities.
“Future fintech startups will face the same choice. Also, many founders of fintech companies are European nationals who have no certainty about their personal status in the UK at the moment. This is likely to sway their choice towards a continental base as well.”
UK to get a lot more pressure from continental competitors
Having a lot less to offer to emerging businesses and their backers, Britain will face growing competition from European regulators and companies which will look to quickly close the gap that would open in the fintech space.
“Competition is already starting to show in regulation with the French watchdog announcing all fintech businesses which have voted Remain are welcome to switch to local licence and leave the UK, ” Schneider said.
“Continental fintech companies are also going to give UK rivals a run for their money, trying to pry as much business as possible out of their hands over the coming years.
“Appetite from both venture capitalists and angel investors will drop as a result of the businesses’ reluctance to deal and their hesitation to what they should do next.
“Brickvest itself is weighing its options at the moment and may choose to get a licence in Germany or France even though the regulatory environment there is not as favourable as in the UK.
“We have 30 angel investors, most of whom are based in Europe, and feel quite well positioned currently. Nevertheless, if the UK gets separated from the common market we could also focus more of our operations in continental Europe, ” Schneider concluded.
BrickVest is a real estate investment platform launched in February 2016 by co-founders Emmanuel Lumineau, Thomas Schneider and Adalbert Wysocki. Lumineau who is CEO of the company has 15 years of experience in technology, real estate and energy infrastructure. Schneider is a real estate investment, finance and development expert with over 12 years of experience, and Wysocki has spent over 15 years at senior roles in the engineering and technology sectors.
In a statement following the Brexit vote, Lumineau commented, “Without doubt the UK is now a less attractive option for fintech investment platforms who want to operate across Europe.
“Ultimately, the UK’s exit from the EU will limit the growth potential of UK-based fintech companies. These companies, as they will no longer be equipped to navigate the complex regulatory environment across borders, will be confined to doing business only in the UK.
“Eventually it will lead to London losing its fintech hub status”.
Copyright © 2016 FINTECH GLOBAL
