The Labour Party’s landslide victory in the UK general election last week kicked the Conservatives out of office, replacing Prime Minister Rishi Sunak with Keir Starmer. However, while the Labour Party gained the majority of seats in the house, the Tories
retained 121 seats, and other notable parties, including the Green Party, Reform UK, and Liberal Democrats gained seats in parliament. There were also significant victories for independent candidates, such as Jeremy Corbyn in Islington North.
In his first address as prime minister, Starmer promised “a decade of national renewal” to the British public; indicating a complete reset of the country’s policies. The question remains, what do these changes to parliament mean for the future of fintech
in the UK?
As
outlined in their manifesto, the Labour Party committed to fostering innovation in the fintech sector, expanding the British Business Bank, speeding up regulatory processes, and laying out a new fraud strategy.
Growth and SMEs
In terms of innovation, the Labour Party detailed their commitment to bolstering fintech growth and retaining the UK’s status as a global fintech hub.
Sara Brigden, managing director at ForrestBrown, an R&D tax advising company, stated: “Following Labour’s election victory, the spotlight will now turn to the new government’s ability to deliver on its manifesto commitments. An industrial strategy with innovation
at its heart will be key to making the ‘age of national renewal’ promised by the new Prime Minister a reality.”
She outlined how the new government should set targets for R&D investments to attract funding in the long term.
Brigden concluded: “With the right framework in place, business innovation can play a vital role in achieving the government’s aim to kickstart economic growth.”
Dan McLoughlin, Fraud and Security Specialist at Lynx, stated: “The new Labour government needs to focus on three key things: maintaining the UK finance industry’s global leadership; ensuring our regulations remain relevant domestically and globally; and
fostering growth in our finance and fintech industries.
He expressed that Labour’s positive outlook on AI development, expansion of open banking and open finance indicate a path of growth for the future of fintech in the UK. However, there needs to be a clear strategy in place when it comes to the development
of generative AI (GenAI) technologies.
A core part of the UK financial sector are SMEs, and their output can effectively boost the economy and in turn contribute to employment and innovation. Voices from the industry have expressed that the new government needs to provide greater clarity on how
they plan to support SMEs during their tenure.
Theo Chatha, chief financial officer of Bibby Financial Services, observed that SMEs need to be prioritised under the new government. Regarding Labour’s promise on the expansion of the British Business Bank to expand access to capital to SMEs, Chatha commented:
“We were encouraged to see Labour commit to strengthening the British Business Bank’s Bank Referral Scheme in January. But clearly, more still needs to be done to make it work effectively. Despite much effort from the British Business Bank and the designated
platforms and lenders, the number of businesses the scheme has supported since its launch in 2016 has been hugely disappointing.”
Sinead McHale, CEO of Lloyds-backed company Satago, added: “Despite recent signs of easing inflation, business costs remain high. SMEs continue to grapple with profitability challenges and longer-term growth plans, with limited access to finance and late
payments persisting from larger corporations.
“New policies must be implemented to support SMEs further, such as stricter penalties for late payments from larger businesses and incentivising prompt payment practices. Meanwhile, increased collaboration between fintechs and banks will help SMEs adopt
more sustainable cashflow management practices.
Commenting on growth from a cloud perspective, Mark Boost, CEO of Civo said: “I am hopeful that the Labour Party will bring a new perspective to the UK cloud market, with a stronger focus on truly sovereign cloud providers. For too long, the government has
prioritised US big tech over our own UK sovereign capabilities. This needs to change so we can have a stronger and more robust UK economy that is not dependent on giant hyperscale companies that do not have the best interests of the UK at heart.
Regulation
The financial sector is clamouring for faster and more effective regulation to be rolled out. There is a flurry of new frameworks coming into play in the EU and UK, such as the Third Payments Services Directive (PSD3) and new Payments System Regulator (PSR)
legislation.
Al Lakhani, CEO of IDEE, pointed out that Labour needs to outline a more effective cybersecurity strategy, stating: “The electoral commission: hacked. NHS hospitals: hacked. Countless UK businesses: hacked. How many attacks are too many?
With Labour coming into power for the first time in fourteen years, a comprehensive strategy to strengthen the UK’s cyber defences is urgently needed. The EU is implementing the NIS2 directive, why does the UK lag in securing its digital infrastructure? It’s
time for the government to wake up, smell the coffee and develop a plan to change this.”
McLoughlin furthered: “In Labour’s manifesto, it offered no mention of interfering with existing or proposed regulations, so we can expect that the PSR regulations addressing Authorised Push payment Fraud (APPF), due in October, will still come into effect.
This is critical, as this regulation is being followed closely by authorities worldwide. It could be a catalyst for the global convergence of fraud prevention and anti-money laundering, as well as highlight the scale of the problem of money mules, which are
funding organised crime all over the world.
“The industry will be watching the moves of Labour closely as it establishes itself in parliament, particularly its proposal for a more collaborative relationship with the EU. This could well lead to compliance with the EU’s PSD3 being mandated in UK regulation.
Either way, UK fintechs should ensure compliance with this regulation if they intend to operate within the EU.”
Magali Van Bulck, head of government relations at Wise, emphasised that hidden fees are a devastating loss to British consumers, and that the government needs to take a stand against concealed fees to protect the public.
She remarked: “As a matter of urgency, we encourage the newly elected government to complete the Payment Services Regulations review, and make the rules fit for purpose. It’s time to scrap the loopholes that rip off consumers and businesses. Everyone should
know what they pay.”
National Wealth Fund
Rachel Reeves, who has been appointed as Chancellor, stated in her
first speech that the newly elected government aims to launch a new National Wealth Fund. She warned that the UK’s public finances are in their worst state since World War II.
Naureen Zahid, Director of Investor Relations at OpenOcean, was critical of the announcement, stating: “Reeves’s economic plan treads a fine line between opportunity and overreach. We cannot compromise long-term economic viability in the rush to deliver
quick wins and growth. To realise the 1:3 ratio of public to private investment that the Chancellor is targeting for the Wealth Fund, investors must see that UK market is both stable and capable of providing outsized returns in key areas like R&D and emerging
technology. The true test of these reforms will be in whether they can establish a self-sustaining UK startup ecosystem where companies choose to list on the London Stock Exchange rather than look abroad.
“The striking similarity between Labour’s National Wealth Fund and the UK Infrastructure Bank raises questions about its efficiency and purpose. Labour must distinguish the two, whether through rebranding the UKIB, establishing the NWF as a subsidiary, or
consolidating multiple public bodies. Investors need to see that this fund isn’t merely a rebadged version of existing structures, but a genuine new tool for economic growth that can deliver returns worthy of their investment.”