FinTech companies true to their word after Brexit

British FinTech firms that predicted in 2018 that they would partially move their UK operations to the EU after Brexit have largely followed through on their plans, according to new research published this week in the journal Advances in Economic Geography.

FinTech, which focuses on the application of digital technology to the financial sector, is a key growth industry worldwide, with the UK leading the world alongside the US and Singapore. In 2019, the London-based UK FinTech industry generated annual revenues of £11bn, employed 76,500 people and attracted £3.6bn of investment. Researchers at Anglia Ruskin University (ARU) surveyed companies at the FinTech Connect event in London in 2018 on whether they had plans to move to either the EU or the US after Brexit.

At the time, the exact nature of the UK’s exit from the EU was unknown, so researchers offered three scenarios; a no deal Brexit, a Brexit with an agreement negotiated between the UK and the EU; and a scenario where Brexit was cancelled. In 2018, of the 38 UK companies surveyed, 37% thought it likely or very likely that parts of their UK business unit would be moved to the EU if the UK left without a deal. In the event of an agreement, this figure was reduced to 24%.

The percentage of firms planning to move at least partially to the US if the UK left the EU without a deal was 13%, or 11% with a deal. Follow-up research in February 2022 using data from company websites, LinkedIn, Companies House and Crunchbase revealed that 39% of firms had opened new offices overseas without closing their UK operations, while 13% had completely dissolved their UK operations. Researchers found that 84% of firms had largely followed through on their predictions, whether moving or staying in the UK.

This figure included firms that thought they would move completely but ended up moving only partially, as well as firms that thought they would move to the EU but ended up moving to the US. The survey found that rather than businesses flocking to specific EU hubs, companies leaving the UK in whole or in part for the EU tended to spread out, with destinations as diverse as Paris, Amsterdam, Krakow, Sofia and Barcelona.

But if firms went to the United States, they gravitated toward New York City. Lead author Dr Franziska Sohns, Associate Professor of Economic Geography at Anglia Ruskin University (ARU), said: “While most firms did not foresee relocation after Brexit, those that did saw the EU as the most important potential relocation destination, highlighting the importance of geographical and institutional proximity . Our results indicate that Brexit was a significant push factor for UK FinTech firms anticipating relocation to the EU and, to a lesser extent, to the US as well.”

“We also found that firms with existing strong social and economic links with the EU were more likely to consider relocation. Motives varied, for example one firm moved its headquarters from London to Sofia due to declining growth opportunities in the UK, while another opened an office in Malta to keep the EU passport.”