UK FinTech: Life after Brexit

Eight weeks ago I wrote Part 1 of this post called #Brexit good for UK #FinTech and got an overwhelming response - mostly abuse! 😫? I had to double check my post to make sure I hadn't inadvertently insulted somebody's prophet or, worse, suggested again that Bitcoin is just an over-hyped big waste of electricity! Turns out I simply held a controversial and, what I thought at the time to be, minority view.

Then something interesting happened. In my role I have the privilege of speaking at a lot of #FinTech events around the world and for the past few months the conversation tended to turn to #Brexit. Publicly folks were quite vocal about their brexit concerns but privately (for Europeans) they were rather envious of the UK being given the opportunity to decide and mostly saw brexit as an opportunity for the UK if handled correctly. When I pressed for why they weren't blogging/posting that view it was one of self-censorship. Folks working for big corporates and larger startups were understandably concerned about making public remarks for fear of being quoted and contradicting the (usually Remain) party line of their leaders. Secondly the brexit camp has been consistently badged as a bunch of bigoted loons so they didn't want to be tarred with that brush!

The campaign

As the referendum date neared it was disappointing to see both sides fighting a superficial campaign. This was the biggest decision the UK electorate were to be asked in a generation but it descended into "what is best for me and my job right now" or "if you don't [stay/leave] then [insert terrible consequence] will happen" type fear tactics. It all rather turned me off. I didn't campaign for brexit but instead tried to use my various channels to field the counter-arguments for why Brexit would be good for UK fintech and challenge the false facts flying around. 

Fast forward to yesterday's historic EU referendum day in the UK. Typically it was chucking it down with rain and none of the trains were working in London but there was also a tangible energy and excitement in the air. The Remain camp were out in force and I was offered a RemaIN sticker several times on my commute into our SeccoSoho office and there were "Better In" t-shirts worn everywhere (which were made in China not EU/UK but don't get me started on that!). It seemed like the remain camp would win comfortably. Despite Southern Train's best attempts to prevent me getting home I made it and settled down for a long night with a curry, beer and BBC News coverage. The assumption was a Remain victory, driven by a recent YouGov poll. The poll had sent the day traders into a trading frenzy. Then I noted something a bit odd about 9:30pm. There were two trending hashtags on twitter: #IVotedLeave 50k tweets: #IVotedRemain 2k tweets. Something was happening. 

The Result

About midnight there was the big Sunderland results announcement in favour of Brexit. If you don't know, Sunderland is a northern-eastern city in the UK that has been on the receiving end of several billion in EU grants so for them to reject EU set the tone of the night.

About 3am I went to sleep, still not knowing the end result. By the time my 3 year old daughter woke me at the usual 6am the news agencies were calling it. The UK had voted to leave the EU. The big stories of the morning were political and economic. Cameron was to resign (eventually). Boris was doing an impression of Bill Pullman in Independence Day. Corbyn was mumbling something and Farage was basking in the glory.

I expect the political fallout will take the rest of 2016 but the economic fallout was front of mind. The pound had lost 10% and the markets were in turmoil. It wasn't going to script and the uncertainly was driving analysts mad.

The Pound

The Bank of England and various other financial institutions released press statements basically saying "don't worry, we have a contingency plan for this" which was a good stalling tactic whilst they tried to write one! In short - nothing has changed, at least not until we chose in invoke Article 50 with the EU which officially declares our intent to leave and kicks off 2 years of negotiations. From speaking with #FinTech folks these 3 things seem to be front of mind so I'll address them and what I believe will happen.

The Priorities

Immigration - London is a melting pot of awesome people from all over the world. All with amazing talent and ambition and all holding various types of passports/visas. I've seen the worry among colleagues on what will happen to them. Will they be allowed to work/stay in the UK. Will they enjoy the same freedoms of movement, employment and benefits. I expect this to be a key Article 50 negotiation topic and likely the UK will put in place a similar points system like they have for international entrants, but with slicker processing and amnesty for those already in the UK. 

Passporting - I don't mean paper border passports but market ones. A challenger bank operating in a EU state has permission to passport their licence to all the other EU states. In essence, get regulated just once for access to a range of markets. I don't know what will happen here. The value exchange with UK-EU may not be as balanced and there will be political pressure in EU to exclude UK competition. It could be there is an agreement to continue whole/part of this scheme or it could be FinTechs have to console themselves with the ability to expand globally without the EU red-tape!

Directives -  There are various EU directives in play or proposed that impact on the UK #FinTech sector such as PSDII. I expect the FCA, PRA and BoE to set up a committee (part of a subset of the Brexit legal audit) to look at each rule/law/regulation in turn and decide whether to keep/drop or in-house our own interpretation. For PSDII I fully expect the FCA to take this under their wing and implement a version of it anyway (they always seemed gutted they never thought of PSDII themselves anyway!). This 'directive buffet' will be a major feature of our Article 50 negotiations.

It's early days and I sympathise with the junior staff at said institutions & banks that have just lost their weekend. We'll know more by this time next week and I don't believe it will seem as apocalyptic as it has been made out to be today. There was always an expectation of short-term volatility but today's drop in££1 value was significant, albeit it has rallied somewhat since then. Monday morning markets will be one to watch keenly. 

Where now

Well I'm now bored of all the sour grapes and negative comments from the remain camp. The silly stickers and t-shirts didn't work. 'Project Fear' didn't work. It turns out the brexit folks weren't some crazy bigoted simpleton minority like we were made out to be but actually the majority of UK folks. Ordinary people who voted for long term self-determination over short-term stability. The referendum is over and the people have decided. It's time to respect the majority decision of your peers and pull together for our future. Leaving EU is a big risk to the UK but it's also a big opportunity to shape our own destiny - let's make it a good one together!