It has been one year since the publication of the Kalifa Review of Fintech – a document that sought to provide a roadmap to ensure the UK’s prominence in the global Fintech ecosystem. On the anniversary of the publication, there have been multiple comments regarding the success of the Review in boosting support for Fintech innovation, opinions on the outcome are mixed at best.
Today, Fintech Founders, a group of top Fintech executives have issued a statement criticizing UK policymakers as falling short in providing needed support stating “so far there has been little progress made with implementing its recommendations.”
Simultaneously, Fintech Founders has issued a new call for action to “tackle the funding gap” providing an eight-point plan to improve the funding landscape for the UK Fintech sector.
Fintech Founders point to the statement by the Review that states there is a £2 billion funding gap in growth capital compelling founders to sell as opposed to building their businesses in the UK, impeding early-stage firms from reaching their full potential.
The concrete recommendations include extending existing tax benefits to Fintech companies while “unlocking more sources of long-term, patient capital.” Fintech Founders stated that changing existing investment rules around pension funds could help provided needed capital and is an action the government has indicated it wants to take but has yet to do so.
To summarize the recommendations by the Fintech Founders:
- Expand existing SEIS/EIS and VCT tax benefits, including Fintechs
- Re-evaluate proposed changes to the R&D tax credits scheme, and, if necessary, cancel the scheduled cap on the amount of R&D relief SMEs can claim
- Lift the existing pension charge cap (as recently consulted on) to unlock greater levels of patient capital
- Make ISAs more flexible so their holders can invest in unquoted companies, unlocking vital funds for those firms
- Raise current minimum requirement (MREL) thresholds above £15-25bn, so that the UK is on a par with other jurisdictions including the US and EU
- Provide access to the term funding scheme for peer-to-peer fintech lending platforms
- Improve research coverage by raising the cap (currently £200m of market capitalisation) at which SMEs are free from MiFID rules
- Either remove the rule whereby a listed company issuing more than 20 per cent of its share capital is required to publish a prospectus – or at least increase the limit so that it applies to fewer companies
The 15-page report may be downloaded here.
Fintech Founders attest that these recommendations will assist the UK government’s ambition to maintain and create a world-class Fintech funding environment.
Fintech Founders adds that this most recent report follows a survey that indicated its members were losing confidence in the government’s support of the Kalifa Review.
“… all those who welcomed the Review, more than two-thirds said that the Government is not interested in acting on its recommendations. The survey also showed that access to funding remains the most commonly cited challenge for founders.”
Fintech Founders cautioned the government that the UK is at risk of losing its status as Europe’s, or perhaps the world’s, top Fintech hub.
“The UK currently has a strong international position when it comes to fintech, but we risk throwing this away. If the Government is serious about fintech it needs to act to make sure that UK fintech companies can access the funds they need to grow and compete. The Kalifa Review was promising but a year on and hardly anything has actually been done by the UK Government. The Government needs to stop talking the talk and start walking the walk if we are to retain our status as a Fintech Hub.”
The report states that the UK “punches above its weight” when it comes to Fintech and there are many that support the sector. But, you can never take a preeminent position for granted – something the government appears to be doing now.
“Our members hope to work with the Government and financial regulator to help bring these recommendations forward, thereby ensuring that the UK can become an
even more attractive location for fintech founders looking to grow their companies and build them into global success stories,” states the Fintech Founders report.