by Marco Rossi
Leave the future for later. Brexit already left its traces
The people expressed its will: the UK must leave the European Union and get its sovereignty back. It doesn’t matter whether it was only half of the Kingdom’s countries to wish to head out of the door. The Union Jack has to leave.
And finally, we might have a date for it: January 31st, since the EU granted an — umpteenth — extension to grant the chance of finding the best deal for both parties.
However, this newly found certainty on whether the UK would actually exit the Union, hasn’t really settled the spirits of those first-hand involved in the economic future of the country and its capital city, a hot hub for global innovation and finance.
First off, let me debunk what many Europeanists believe — or like to believe — will happen: Great Britain most certainly will not witness a sudden, gargantuan economic recession as a consequence of Brexit.
Sure, the market will shake and we’ll experience new, interesting developments on the footsie. But no drama and no crisis are on sight. Especially in the tech sector.
The latest evaluations from Innovative Finance for the first half of 2019, reported a record growth of £2.9 billion (roughly $3,76 billion) in funds in the fintech sector across a total of 123 deals. Although the number of deals decreased, the individual value of each deal increased in respect of last year (which was £3,3 billion for the whole year).
One should only think that from September 2018, more than £65 million (roughly $84.31 million) have been invested on Crowdcube — possibly the best-known fundraising platform for the fintech industry — according to Co-founder Luke Lang.
The financial and technological strength of the British capital is, thus, extremely hard to exceed. Many cities on continental Europe are trying to, but, as for now, there’s no game. According to TheCityUK, the volume of tertiary and financial services exported from the country was roughly $88 billion in 2018. New esteems set exports at even higher volumes.
However, it is also true that most of the business made by the capital is given by startups and corporations that do have a subsidiary or any kind of bond with the member states of the European Union, whether they are technologically developing — as Lithuania, Portugal, or Estonia — or already affirmed — as Germany or France.
For example, London-based unicorn TransferWise applied for a money-transfer license in Brussels earlier this year and Revolut obtained a European banking license from the European Central Bank (ECB). Both cited Brexit as a reason for such decision. Also more traditional banks as the Royal Bank of Scotland or Lloyd’s have secured licenses in several other European countries.
In brief, both modern and traditional financial institutions are preparing for every kind of contingency, be it a “deal scenario” or not.
After all, the chance that Brexit will cut off the UK from the main source of educated manpower coming from EU countries is still looming large. Imposing expensive work permits or restricting the entry with visas and residence permits might hinder the recruitment of many young, bright Europeans the UK fintech scene heavily relies upon.
According to Fabian Vandenreydt from B-Hive (in an article by Madhi Mavadiya on Forbes): “the problem in the U.K. is that there are not enough new entrants into the workforce being trained in new positions relevant to the fintech sector. So there is a clear need for importing talent.”
On the other hand, though, it is also true that Europeans move to countries they need a visa to stay in, as the USA, Australia, or China. In fact, they mainly move for extra contextual reasons, such as personal realisation, standards of living, experience abroad, higher salaries, climbing the social ladder, and so on.
Although freedom of movement should be preserved, since it is a major conquest in the modern world and in the EU, a closed border does not necessarily imply that European youngsters will stop moving to — or passing through — the UK because of visas and permits.
The problem, rather, lies in the relocation of manpower, which goes hand in hand with the relocation of businesses and assets, due to the loss of passporting rights for companies within the Union.
We already saw that two of the most promising fintech companies, TransferWise and Revolut, took precautions for a no-deal Brexit, but many other — 275 as of March — have done so as well. Dublin and Luxembourg have seen a wave of British companies relocating their businesses, followed by Paris, Frankfurt, and Amsterdam, moving billions of assets as well.
The example of the Lloyd’s insurance market is a clear example: policies and insurance covers are still traded in London, in the traditional ways of the Lloyd’s market, but the actual warranty is covered by The Lloyd’s Insurance Company S.A. of Brussels!
Whether this will become a huge shock in purely financial terms is still uncertain and, at present, authors and analysts can only advance speculations and possibilities.
But one thing is certain: if anything, Brexit already left a footprint in the British and global economics.