How the UK can remain a leader in the FinTech industry

By Gigi Zappel, CEO and Co-founder at IMMO

The UK has been a leader in the European fintech industry for a long time, known for its exceptional entrepreneurial talent and dynamic financial marketplace. Ranked 2nd in the world with 30 fintech unicorns as of 2024, the UK created a perfect environment for fintech innovation, offering world-class talent and expertise, a forward-thinking approach to regulation, and access to capital. However, recent challenges, catalysed by the disbandment of the Tech Nation initiative last year and bursting of the Alt-Fi bubble, have affected this leadership, resulting in a decline in the UK’s tech landscape outlook.  

Despite these challenges, there are several key areas where the UK can focus to maintain its top position in the European fintech landscape. Addressing these challenges head-on can ensure sustainable growth and innovation, keeping the UK at the forefront of fintech innovation.

The key challenges for the UK tech landscape

To ensure that the UK remains a top player in the European fintech industry, the incoming government must address several key challenges. Chief among these is the talent shortage. Since Brexit, British companies have faced increased difficulties in accessing the wider European market, limiting the hiring options for UK-based technology companies. The government must make the UK an attractive destination for global talent to bridge this gap and support the tech sector’s growth, especially as the tech industry relies heavily on skilled labour.

Another critical challenge is access to capital. Maintaining and enhancing the availability of venture capital and growth funding is crucial. Although the UK still leads in venture and growth funding within the European context, this advantage is becoming slimmer. The government must work to ensure that tech companies have access to the necessary financial resources to innovate and scale.

Uncertainty surrounding regulatory alignment between the UK and the broader European market can also hinder long-term planning and investment decisions for tech companies operating in the UK. Ensuring that the UK’s regulatory framework is supportive of innovation and aligned with international standards is essential. Diverging too far from EU regulations could complicate market access and operational logistics for tech companies, so regulatory alignment must be a priority.

Additionally, the government must ensure that changes in the tax framework do not erode the attractiveness of starting entrepreneurial endeavours. A competitive tax environment is vital for fostering innovation and encouraging startups to thrive.

Measures to keep the industry competitive

Several strategic measures need to be taken by the incoming government to ensure the UK fintech industry remains competitive. Enhancing research and development (R&D) support, particularly in emerging technologies like artificial intelligence (AI) and quantum computing, will be crucial. By investing in these areas, the UK can ensure it remains at the cutting edge of innovation and continues to attract global interest and investment.

Targeted tax incentives and grants aimed at high-tech projects, such as the recent Innovate UK Smart Grants, can further stimulate growth, research and innovation. These financial incentives can make it easier for startups and established tech companies to undertake ambitious projects that push the boundaries of technology and drive the industry forward.

Streamlining visa processes for tech talent is another important measure. Simplifying these processes and providing incentives for global tech experts to work in the UK will help bridge the talent gap created in-part  by Brexit and the instatement of the UK as ‘third country’ for the majority of its European counteparts, making it harder for talent to move to or from the UK. Ensuring the Visa application process is efficient  will ensure that UK-based tech companies can attract the skilled labour we require..

Securing the future…

While the UK's fintech industry remains strong, challenges stemming from factors like Brexit, Covid-19, and the depreciation in support for a fintech landscape pose significant threats to its future. To maintain its leading position in Europe, the UK must address these setbacks head-on.

The incoming government has a crucial role to play. By focusing on mitigating the talent shortage, enhancing access to capital, and boosting R&D in emerging technologies, the UK can continue to foster a thriving fintech environment. Strategic investments in innovation and infrastructure are essential to create a robust ecosystem that supports growth and attracts international talent and capital.

By adopting these strategies, the UK can solidify its position as a global leader in the fintech industry, setting new standards worldwide and continuing to drive growth and innovation.