UK fintech industry leaders are urging the British government to enhance tax relief and facilitate increased investment, with some executives cautioning that a shortage of domestic investors is hindering the sector’s progress.
Innovate Finance’s “Unicorn Council,” composed of CEOs from Monzo, Revolut’s UK arm, and ClearBank, outlined policy recommendations on Monday aimed at sustaining the UK’s position as a fintech hub.
Global venture capital investments dipped to nearly a five-year low in the first quarter of 2024, according to PitchBook data, influenced by heightened interest rates dampening risk appetite.
UK fintech firms highlight insufficient investment from domestically-based investors, particularly in the UK.
“There is a well-documented problem with capital supply in both the UK listed markets and private Growth Capital,” stated the group.
“All of the investment across our biggest fintechs (is) all overseas. Where are the UK pension funds? Why isn’t that growth actually going into the pockets of the UK?” queried ClearBank CEO Charles McManus during the Innovate Finance Global Summit (IFGS) conference in London on Monday.
The group’s recommendations entail scrapping stamp duty and enacting “existing plans to address these capital gaps,” without specifying details.
Moreover, the government should broaden the scope of business asset disposal relief, a scheme reducing capital gains tax, and introduce “a VAT-rebate scheme” for emerging fintechs, according to the group’s statement.
Despite the global fundraising slowdown, some UK fintechs are securing fresh funding.
Monzo, the digital bank, announced last month that it raised £340 million at a £4 billion valuation, led by CapitalG, a fund under Google-owner Alphabet.
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While the UK fintech sector faces fundraising challenges globally, the UK government reaffirmed its commitment to supporting the industry, backing initiatives like The Centre for Finance, Innovation, and Technology launch last year. This effort aims to dismantle barriers to sector expansion and bolster job creation.
