The UK election: what's the result for banking and fintech?

The UK went to the polls on June 8th, and the outcome was… inconclusive. Instead of the Conservative majority Theresa May sought (and was originally predicted), the result was a hung Parliament where no party won enough seats to govern independently.

Negotiations are still ongoing, so as we write there is no definite outcome on government, policies, Brexit or anything in between. As nothing is yet certain, this leaves us free to speculate on what the outcome of Theresa May’s political gamble will truly be. It could be positive, it could be negative, it is too early to tell.

“One thing’s for certain, nothing’s certain” - Simon Taylor, co-founder 11:FS.

There has been much discussion at 11:FS around the election result and the Brexit negotiations to come, and their impact on the future of fintech and banking. Below we present two differing views on what this may look like:

In the blue corner:

Chris Skinner, Non-Executive Director, 11:FS, and author of the bestselling book Digital Bank:

“The UK election result is good for UK fintech”

In the red corner:

Aden Davies, Director of Portfolio Management, 11:FS:

“The election outcome gave me some hope but there is a long way to go.”

Will there be a significant impact on the banking and fintech industry following the election result and the upcoming Brexit negotiations?

Chris Skinner:The ramifications for Brexit, fintech and Britain’s financial system, are basically good.

The whole point of calling the election was to give the Conservatives a greater Parliamentary mandate to negotiate a hard Brexit. Instead, Theresa May has come out of the election weaker, diminished and with a hung Parliament. Her election gamble and loss means that the Brexit process becomes far less radical. For the UK financial system and London’s fintech scene, I’ve always said that we don’t know what Brexit means until the negotiations begin - and a split Parliament makes this unclear. We will just have to wait and see. What is clear is that there is no strong and stable government. However, being an optimist, the one thing that may be the silver lining here is that no strong Conservative government means no hard Brexit. Instead, with a split Parliament, the next two years will be far more open to embracing EU requests, and the Brexit discussions will be softened and more conciliatory. A soft Brexit means retaining access to the Single Market and the free movement of people. The bottom-line for the UK fintech scene is that it will stay strong and stable. I don’t see all the firms that are based here moving away and, more importantly, the talent pool is still here. The ability to find technologists, working alongside financiers and regulators remains strong and stable here. That has not changed and will not change until the Brexit process is clear.

Aden Davies: We still do not know what the impact of Brexit will truly be on the country, let alone the banking or fintech sector.

The Government are in such disarray at the moment that even starting the negotiations on time looks in jeopardy, let alone finishing them satisfactorily. I hope we start to see progress over the coming months as to what our position will be. The talk of a softer Brexit is interesting - but is it grounded in anything like reality? Any attempt to remain in the single market without adhering to the four freedoms – of movement of goods, services, people, and capital - feels disillusioned at best. [However],I am more positive than I was that Brexit will be diluted now that the Tories have lost their majority. But, we have already seen a huge drop in student applications to the UK since the Brexit result last June. If talent continues to drain away from London and the UK for cheaper, sunnier places, then I fear the worst. This leaves banking in limbo. Talk of moving jobs to other countries largely remains talk. Companies with headquarters in London, looking to found in other countries, are starting to reconsider as the threat of talent movement and country access becomes too great a risk. Passporting outcomes will no doubt play a large part in the Brexit negotiations. Without EU membership banks could be crippled cross-border-wise. The election outcome gave me some hope but there is a long way to go. For further debate on all things fintech, banking and current affairs, check out our dedicated podcast, Fintech Insider.