Britain will vote on the European Union Referendum on Thursday when millions of people will decide whether or not to stay in the EU. If Britain decides to leave, though, it could cost the UK economy as much as $5 billion over the next five years, according to a report conducted by consultancy William Garrity Associates.
When it comes to the Brexit campaign there seems to be one theme consistently circulating: that EU regulation is stifling those who want to branch out on their own and make a name for themselves in the world of business.
Naturally, you would think then that the FinTech sector, considered to have the most entrepreneurial people, would be in favor of leaving the EU. That, however, is not the case.
A recent poll by Financial News found that two-thirds of financial technology firms believe that leaving the EU would produce a negative impact on the UK startup scene.
To further reinforce the impact that the UK leaving the EU would have on the FinTech community, U.S. payment systems giant ACI Worldwide recently warned that a Brexit would be a disaster and would jeopardize London’s role as a central hub for financial services in Europe.
Now, however, in a new report commissioned by FinTech Week, William Garrity Associates has undertaken the task of determining the risks that a Brexit would produce by detailing ten factors, estimating that billions of dollars of FinTech investment to the UK could be at risk.
Among the ten factors listed include UK’s FinTech human capital, which amounts to 30% coming from the EU and overseas; a lack of say in the single European capital market and digital single market, which is estimated to contribute an additional €415 billion each year to Europe’s economy; higher taxation, more bureaucracy, and competition for company location; reduced access to EU markets; and the loss of the UK’s leadership in ‘RegTech.’
Speaking to CCN, Ian Dowson, CEO of William Garrity Associates, said:
If the UK Brexit’s [today], in the words of my patron saint “Pacman”, it’s Game Over for UK FinTech. EU Cyber Security, Privacy, and Data Protection laws would be an irresistible force making it very difficult to serve EU customers without being inside the EU.
For many years, Britain has been the home for many Bitcoin and FinTech companies with London leading the way of becoming the financial capital not just of the EU, but the world.
London has been offering favorable regulations and access to the European markets for FinTech companies; however, it Britain were to move away the report from William Garrity Associates claims that the UK would have to negotiate with twenty-six other financial regulators or delay market entry until bilateral agreements were signed. Thus, they would end up losing the one advantage they have compared to other regions.
Only recently, the Bank of England said that it would be exploring new financial technologies by working closer with FinTech companies in order to boost cyber security and new payment systems.
With the EU referendum vote just a day away the thought of Britain leaving the EU has got many Bitcoin and FinTech companies reconsidering the location of their operations. According to a report published by Reuters, seven out of ten FinTech companies expressed their intention to move out of London to favorable locations such as Dublin or Luxembourg if the Leave campaign was successful.
Not everyone, however, believes that a Brexit would hurt FinTech in the UK. Former minister of state for trade and investment Digby Jones wrote recently in the City AM that the FinTech boom means that leaving the EU won’t hurt exports.
"The UK is in an exciting position at the epicentre of the FinTech boom, and I believe financial technology solutions will act as a one-stop shop for international trade, securing payments and removing the need for letters of credit, currency hedging, insurance, legal advice and bank-led funding in one step," says Jones.
Now all that remains to be seen is whether Britain votes to stay or leave the EU.
Statements edited for clarity.
Featured image from Shutterstock.