Fintech reforms could harm UK sector growth, experts warn
A leading Westminster think tank has warned that the latest UK government reforms could stifle the country’s competitive edge in fintech growth.
Parliament Street – an influential London-based think tank – says UK regulations have “stifled” London’s competitive edge in fintech growth. The report contrasts with recent studies which have shown that the UK fintech market is the second most dynamic globally, surpassed only by the US in terms of sheer volume and startup innovation.
However, industry experts are concerned that a raft of new government regulations will stifle the industry’s healthy growth and competitive advantage. Parliament Street chief executive Patrick Sullivan criticized what he sees as excessive bureaucracy in the space, which was introduced as a result of the 2008 financial crash.
The think tank criticism comes as new British Prime Minister Liz Truss prepares to announce sweeping reforms to the financial industry in a bid to boost growth and investment. Truss plans to launch a post-Brexit overhaul of regulations to strengthen Britain’s financial services industry.
Fintech and financial services today constitute the UK’s largest export sector and largest source of corporation tax. Recently Truss indicated plans to get rid of EU regulations that limit banks’ bonuses.
Sullivan said: “The financial services industry is the lifeblood of the UK economy and we cannot continue to allow excessive paperwork and compliance rules to stifle growth.”
Fintech in the UK is booming
Despite the bureaucracy required within the fintech space and problems caused by Brexit, the UK’s fintech industry continues to thrive. Other recent regulatory changes have seen employment corridors opened between the UK and EU countries to boost recruitment and prevent problems that have resulted in EU citizens leaving the UK as a result of Brexit.
Market changes in UK fintech regulation required
Speaking about potential reforms, fintech entrepreneur Khalid Talukder, co-founder, DKK Partners, a London-based specialist in emerging currency markets, explained, “The constraints of the 2008 global financial crisis have kept London in a bind for far too long. . Overwhelming amounts of regulation and Red tape has effectively chloroformed entrepreneurs and ambitious financial services firms, while rival cities have been left free to expand and grow without interference. These proposals will turbocharge the city and boost the wider UK economy and should have happened years ago.”
However, other experts are less pessimistic and believe that the current regulations are important to protect customers and build confidence in the UK marketplace. Daniel Layne, founder and CEO of fintech QV Systems said, “It is important to recognize that regulation plays a crucial role in protecting consumers and businesses from bad practices such as misspellings, data loss and fraud. While proposals to roll back some of these policies to free up the city and drive economic growth are admirable, great care must be taken to mitigate any negative issues that may arise from these measures.
Layne added: “Changes to regulation should be proportionate and considered to avoid unintended damage to the long-term future of the financial services industry.”
