UK fintech outside of London
The strength of the UK fintech market is not confined to London. In fact, Deloitte, who led (alongside Tech Nation) on the National Connectivity Chapter of the Kalifa Review, found 25 locations were clusters of fintechs (10 high growth areas, London Superhub, three established and six emerging areas).
The established clusters are the Pennines (including Manchester and Leeds), Scotland (including Edinburgh and Glasgow) and Birmingham. The six emerging are Bristol and Bath, Cambridge, Newcastle and Durham, Northern Ireland, Reading and West of London, and Wales. Each cluster has developed its own specialisms in terms of stage of company and/or fintech sub-segment. For example, the established clusters account for 45% of scaleups outside of London. Taking another example, Reading is home to Microsoft, Vodafone and Huawei UK HQ. There is also a long-standing presence of outsourcing finance operations and data centres in the city, establishing Reading as a home for fintechs focussed on simplification of SME business operations.
Furthermore, investment in the fintech industry outside of London is growing faster than within the city. Global fintech investment grew 183% in 2021 (from 2020), while investment growth in the UK was 217%. Outside London and the South East this was 237%: $696 million investment in 2021 up from $206 million in 2020.
Wealthtech has a strong presence in Scotland, and we also see payment businesses with additional hubs in the Pennines and Scotland.
UK fintech Adoption
Another reason for the strength of the UK’s fintech industry is openness from consumers, policy makers and incumbents to the digital shift in the industry. EY reported that the UK consumer base has one of the highest fintech adoption rates in the world at 71%, versus a global average of 64%. Furthermore, a UK Government study in 2019 found that 56% of traditional financial institutions have put disruption at the heart of their strategy. The commitment to this was highlighted by the fact that 82% of incumbents expected to increase fintech partnerships in the next three-to-five years.
Critically, policymakers have also been on the same page, in fact, they have been helping drive many proactive initiatives to help support and grow the UK fintech ecosystem. A prime example is the FCA’s Sandbox initiatives. The Regulatory Sandbox was launched in 2016 which allows businesses, both authorised and unauthorised firms and including fintechs, to test their innovative products and services in a controlled environment with real customers alongside regulatory expertise. The success is shown by the fact that 92% of firms who use the Regulatory Sandbox have become successfully authorised, 80% of which are still in operation.
The launch of the Kalifa Review in July 2020 demonstrates commitment to the long-term development of the UK fintech sector. The review, published in 2021, made 17 recommendations across five priority areas to help establish comprehensive policy and regulatory strategy to support the industry.
There is also plethora of high-quality initiatives, programmes and communities set up to help the growth of fintech and wider technology companies in the UK. For example, Tech Nation’s fintech programme which is a support network for UK fintech and Insurtech companies ready to scale up. Each cohort is offered insight sessions and networking designed to give members the tools and knowledge they need to scale. Alumni include PrimaryBid, with whom the London Stock Exchange have been in collaboration since 2019 to support retail access to equity offerings.
Tech Nation have gone one step further by organising, with support from HM Treasury, the fintech Delivery Panel. One initiative of the panel is the fintech Pledge, which sets globally leading standards for the establishment of partnerships between the UK’s largest financial institutions, who can become signatories, and fintech firms. This initiative is a world first and aims to make the UK the prime destination to start and scale a financial services technology firm.
The UK fintech community also benefits from industry body representation. Innovate Finance is a community of large institutions, start-ups and scale-ups, investors and government bodies, and acts as an independent industry body with the aim to represent and advance the global fintech community in the UK. There is also fintech Week London, fintech Awards London and the fintech Founders group which are also helping supporting this growing industry.
Additionally, the UK tech workforce is strong, in both numbers and skills, an essential factor in driving financial technology development and innovation. Employers have 350,000 software developers to choose from in London, more than any other European city. This workforce can only strengthen with programmes in place to support talent attraction into the UK, for example, the Tech Nation Visa scheme. Through designation by the Home Office, Tech Nation can endorse applications for the Global Talent Visa, allowing individuals from around the world to work in the UKs digital technology sector. Furthermore, targeted approaches on high growth areas, such as fintech, from agencies such as London & Partners, are bringing a significant impact to these verticals.
The UK is at the forefront of financial services technology with an ecosystem of start-ups, incumbents, consumers and regulators who have all embraced innovation. Specialism, talent and openness are the key to the continued success of the fintech industry both in London and wider UK clusters.
As a result of the FCA’s reform of the listing rules announced in July 2024 (PS24/6), the ‘premium’ and ‘standard’ listing segments of the Main Market were replaced with a new ‘commercial companies’ category for equity shares.
