What does Brexit mean for fintech in Europe?

This week, following two hundred and eighty one days of change, hyperbole and conjecture, Prime Minister May formally triggered the UK’s departure from the European Union.

Whether you side with the 52 or the 48 percent, one issue all Europeans can agree upon is the uncertainty of our collective futures. Deals on commerce, finance and migration need to be redrawn with Europe, and the world, before we find out whether the UK will emerge bravely patriotic or desperately partisan.

Uncertainty, however, means opportunity. From the ashes of the first dot.com bubble emerged this generation’s technology winners, such as Facebook, YouTube, and LinkedIn. Similarly, forged in the throes of the current uncertainty, the real winners of the next technology revolution will emerge. A decade from now, the firms who seize the opportunities created by today’s political and financial uncertainty will be tomorrow’s household names.

But it’s also true that uncertainty inhibits investment and growth. Will this step into the unknown lead to diminished financial and human resources in the UK, starving the nascent fintech industry of the necessary fuel needed to grow? A hard Brexit could be a problem.

If the UK isn’t offered compromises on cornerstone issues such as free movement of people, single market access and efficient methods of trading with the EU, tariffs and restrictions that follow could limit business activity between the UK and continental Europe. It’s this ‘worst case’ outcome that keeps executives and entrepreneurs up at night.

London unquestionably remains the fintech capital of Europe. But, with hard Brexit looming, sentiment is changing. Berlin, Dublin and Paris hope to capitalise. Fintech-friendly, English-speaking Amsterdam heads the alternative pack with its convenient location and quality infrastructure, leading some to proclaim it as the ‘new London’.

Asia is also positioning itself as a genuine alternative, with Singapore and Hong Kong attractive for companies wanting a presence beyond Europe and access to vast pools of young talent and ambitious capital.

Efforts to draw the focus away from London are having an impact. Fintech funding volumes in the UK fell in the second half of 2016, and a drop off in investment is damaging for any industry in its infancy. There’s also anecdotal evidence that European talent may already be staying away, fearing migration to the UK would be curtailed if an overhaul of immigration policy occurs after a hard Brexit.

At Origin, we believe the ‘Doomsday’ outcome is unlikely and, even if it were to occur, we see remain optimistic. Of course, much depends on the coming negotiations and it’s hard to state with confidence what is likely. Theresa May has stressed she doesn’t want an “off the shelf” deal, so there’s little point looking to Norway or Canada for guidance.

In our opinion, compromises must be found on crunch issues affecting financial services and fintech, such as ‘passporting’. London’s importance as the financial services capital of Europe – firmly built on fundamentals such as English language, English law, and an advantageous time zone – is too great to dismiss. The UK government has provided reassurance too, with City minister Simon Kirby stating they’re “absolutely committed to fintech and financial services.”

As shown by the decrease in funding levels in 2016, our community is experiencing some pain as a result of the uncertainty that swirls around Europe. But the UK is on its way, and negotiations will begin. At Origin, we predict uncertainty to subside and growth to resume, and the European fintech industry will be left in a strong position to continue its rapid growth, with our home city firmly at its centre. London and its Square Mile existed at the centre of the financial world long before the EU. We predict its dominance to continue long after.

Whatever the outcome, times of uncertainty are in our view, times of opportunity. Volatility is merely fuel to the fire for nimble, adaptable firms who can react, change and grow. The time for bold actions is now.