Labour Government to Support UK Fintech, May See £328 Billion Tax Boost from Key Sector

The new Labour government is expected to “embrace” the UK Fintech industry. The UK has long been a top global financial services sector, and support of Fintech is key to growth and ongoing relevance. According to a report in CityAM, the new Chancellor of the Exchequer, Rachel Reeves, HM Treasury will continue its support of innovative financial services firms.

The report is joined by a statement that Innovate Finance sent a missive to the Chancellor predicting that Fintechs can be a boon for public finances, as it predicts that Fintech will drive £328 billion in tax revenue.

The UK is home to the second-biggest Fintech investment in the world, only trailing the US. It is estimated that over 76,000 jobs are directly created by the Fintech industry. A combination of a top financial center, an entrepreneurial population, and supportive policymakers has helped to create the top global Fintech hub. Any attempt to stymie growth and innovation would be nonsensical.

Yesterday, Innovate Finance published the “Fintech Plan for Government,” which looks towards regulatory changes that may be able to “unlock growth for the UK economy” without any additional cost. The Plan outlines the needed moves for the new government’s first 100 days to execute on its ambitions.

Janine Hirt, CEO at Innovate Finance, said their goal is to make the UK the “world’s first smart data economy.” At the same time, Hirt claims that there is increasing competition in the Fintech sector, which means  there is a greater need for policy and regulatory leaders to “take action.”

The three top objectives outlined by Innovate Finance include:

  • Build the world’s first smart data economy – this includes Open Banking/Open Finance
  • Make the UK the most secure place in the world for digital finance – this means tackling fraud while creating a National Anti-scam Center.
  • Make the UK the world leader in adopting new tech in finance. While this is an obvious ambition, the group states a regulatory framework should be created to enable future digital financial services and support funding needs while educating the population.

In regard to regulation, the Plan states:

“Regulatory models are failing to keep up and provide appropriate protection in some cases, and failing to support and enable innovation in others. We need a new model for regulators. Phrases like ‘agile regulator’ and ‘regulator as platform’ are often used but with limited definition. There is an opportunity for government to work with regulators to ensure they are forward looking in terms of their operating models and services they provide, utilising data and technologies like AI to be better positioned to adapt at a pace that does not unnecessarily slow down the adoption of new innovations. The following proposals are designed to support the Government’s commitment to create a new Regulatory Office for Innovation.”

The group recommends that “regulators should report on their progress and the FCA and Prudential Regulation Authority (PRA) should include this in their annual reporting on how they are facilitating the medium-to-long term growth and international competitiveness of the UK economy as part of their new secondary objectives.”

In regard to access to capital for Fintechs, the Plan says a comprehensive review of UK capital markets is needed. As part of the goal, the government should consider tax relief for entrepreneurs and investors.

Innovate Finance recommends the support of tokenization of assets – digital securities – as part of a path to boosting capital markets.

As there has been a “well-documented” decline in money invested in the UK stock market, there must be a long-term plan to address this decline.

There are plenty more recommendations. The document is available here.

Ryta Zasiekina, founder of the Fintech company CONCRYT, said the UK governments vocal support of Fintech must turn into action.

“As the new Chancellor, she needs to acknowledge what [the former Chancellor] failed to [do]: that despite the availability of early-stage funding, scaling up remains a challenge for tech start-ups in Britain. Too often, this forces them to seek investment from the US and even relocate their businesses, taking valuable tax revenues with them.

The policy plan for the sector by Innovate Finance clearly sets out how Fintech firms can deliver £328bn in tax revenues to the Treasury by 2029.

The new Labour Government needs to not only acknowledge the vibrancy of the Fintech industry in the UK, but the need for more comprehensive support and resources to foster growth and innovation within the UK’s own investment ecosystem, ensuring that promising ventures can thrive and contribute to the country’s economic prosperity.”

As Labour has acknowledged that financial services is a great UK success story, Zasiekina says the “government needs to deliver on its promise to create the conditions to support innovation and growth in the sector, support new technology, and ensure a pro-innovation regulatory framework.”




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