U.K.’s $10 Billion Fintech Sector Needs Brexit Lift, Review Says

Silla Brush, Bloomberg News

A customer wearing an Apple Inc. logo t-shirt tests an iPhone X smartphone at the Apple store on Regent Street in London, U.K., on Friday, Nov. 3, 2017. Supported by resurgent iPad and Mac sales, the 10-year anniversary iPhone will help push revenue to a record high of $84 billion to $87 billion in the quarter ending in late December, Apple said in a statement. Photographer: Bloomberg/Bloomberg , Photographer: Bloomberg/Bloomberg

(Bloomberg) -- The U.K. should overhaul its stock listing rules and visa requirements to help the country’s fast-growing fintech industry compete after Brexit, a government-backed review has found.

The report, led by former Worldpay boss Ron Kalifa, warned that Britain’s departure from the European Union gave Paris, Berlin and other cities “a window to capitalize on uncertain messaging” around immigration and other regulatory changes.

“Without additional action, the U.K. risks having its market share eroded,” the review warned.

The paper published on Friday is the first of several reviews intended to aid Prime Minister Boris Johnson’s government as it considers easing regulations on the financial industry, which was largely excluded from the British trade deal struck last year with the EU.

The review supports changing stock-listing rules to allow dual-class shares for fintech companies, a change meant to entice founders to list their companies in London while allowing them to retain control over their firms.

Other recommendations include:

allowing companies to join the top tier of London’s market by selling just 10% of their shares, down from 25%
relaxing rules that give existing shareholders first refusal during fundraising, known as preemption rights, to allow companies to raise more capital quickly
the creation of stock indexes for fintech companies to attract investors.

The U.K. is already investing heavily in this industry, accounting for nearly half of venture capital investment in Europe with $4.1 billion in 2020, according to the trade group Innovate Finance.

Fintech firms employ an estimated 60,000 people in Britain and contribute 7 billion pounds ($10 billion) a year to the economy, with some of the biggest companies such as Wise, Monzo Bank Ltd. and Revolut already attracting billion-dollar valuations.

The industry represents a growth opportunity as other parts of the U.K. financial industry lose ground. London has seen trading in European shares and derivatives leave for Amsterdam, Frankfurt, Paris and even rival financial hub New York since the start of the year.

Kalifa’s review also recommends a government-backed but industry-led Centre for Finance, Innovation and Technology to coordinate fintech policies.