Last Sunday marked the three-year anniversary since the UK voted to leave the European Union. There was barely a mention of this milestone in the financial media but I thought it was worth noting for one reason. Despite all the uncertainty that Brexit has wrought UK fintech is booming.
If we go back to the summer of 2016 in the UK Revolut had just 200,000 customers and was worth £42 million after their £6.7 million Series A. Monzo was still called Mondo (they changed their name in August 2016) and was valued at £30 million. Zopa was still a P2P lending platform with no hint of their future plans to obtain a banking license.
Back then many publications were calling for the death of London as a leading fintech hub after the Brexit vote. The FT ran an article about Berlin seeking to replace London as the post-Brexit fintech capital and Business Insider said there was a surge of fintech workers looking to leave London for Berlin. There was even talk of small cities like Vilnius taking advantage of the Brexit situation. Goldman Sachs was forecasting a Brexit-induced recession in the UK in 2017.
Fast forward to today and we see a UK fintech sector that is booming. So much so that there was an article earlier this month in Business Insider that said London may soon eclipse Silicon Valley as the leading fintech hub. That idea would have been laughable back in the summer of 2016. I don’t think anyone expected the UK fintech industry to thrive like it has done.
Since that fateful summer, most of the established fintech companies in the UK have gone from strength to strength. With few exceptions, these companies are growing and raising money at ever higher valuations. There are more fintech unicorns in London today than in San Francisco (although, once you take the broader Bay Area, London still trails in this metric).
When I talk to fintech CEOs in London today most of them are so sick of Brexit talk they just want it over with so they can move on. None that I have spoken to expect it to hinder their business significantly although many said the biggest challenge will be attracting and retaining top talent. With a hard Brexit UK companies will likely lose many European-born workers.
UK fintech companies are taking action to ameliorate this one major impact of Brexit. Many have decided to open an office in the European Union. LendInvest has said it will boost its presence in Luxembourg, although they have had a presence there since 2014. Funding Circle has had operations in Germany and the Netherlands since before Brexit as well. Starling Bank is opening an office in Dublin this year with an offering for Irish consumers. Transferwise has said that it will be setting up a new European headquarters but London will remain its global base. Zopa has opened a development center in Barcelona.
This article has obviously been written while the UK government is still grappling with exactly how to exit the European Union. A hard Brexit could change the equation here and cause significant problems for UK fintech companies. But I think it will be difficult to completely undo the amazing momentum and growth that has been achieved in the three years since Brexit. London will remain the fintech capital of Europe for the foreseeable future.