Fintech sector review calls for extension of R&D tax reliefs

An independent review has set out a plan for the UK to retain its global leadership in fintech by helping the country’s financial technology firms to scale up, access the talent and finance they need, and deliver better financial services

The independent review was led by Ron Kalifa OBE and has set out a strategy to put the UK at the top of the global fintech league table.

Key recommendations include a new fintech scale-up visa stream, a ‘scale box’ for growing firms and changes to UK listings rules.

The UK has more than 10% of the global market share in fintech and the sector is now worth more than £11bn a year to the UK economy. In 2020, investment in UK fintech stood at $4.1bn (£2.9bn) in 2020 – more than the next four European countries combined.

The independent review found the UK was at a pivotal moment and presents a wide-ranging strategy and delivery model to build on its existing attractiveness to start-ups firms and become the best place for a fintech business to reach global scale.

The fintech report marks an important step in the Chancellor Rishi Sunak’s plan to make the UK the most open and dynamic place in the world to operate a financial services business. The government will now examine the recommendations and respond in due course.

There are calls for an extension of tax breaks including expanding research and development (R&D) tax credits, Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCT): 97% of fintech founders have used tax-incentivised investment schemes including EIS, Seed Enterprise Investment Scheme (SEIS) and VCT, but nearly half (47%) were concerned about their ability to qualify for such tax relief if their business models switched from being unregulated to regulated in the future.

A critical part of the review highlighted the importance of recruiting highly qualified staff with a mix of training and expanding visa flexibility to allow firms to hire international expertise. It stressed the need to retrain and upskill adults to meet the needs of UK fintech by ensuring access to short courses from high-quality education providers at low cost. It is estimated that 90% of the UK workforce will need to be reskilled by 2030.

The review highlights the opportunity to create highly skilled jobs across the UK, boost trade and extend a competitive edge over other leading fintech hubs. Recommendations include:

  • introducing a new ‘fintech scale up’ visa route for specialists from around the world
  • implementing a ‘scale box’ to provide regulatory support for growing firms
  • improving UK listings rules with free float reduction, dual class shares and relaxation of pre-emption rights
  • creating a £1bn fintech ‘growth fund’ to help firms grow independently
  • establishing a private sector-led Centre for Finance, Innovation and Technology to support national coordination and growth in fintech across the UK

The Chancellor said: ‘Fintech is one of the UK’s great success stories and will help us seize new opportunities around the world. We must now build on our global reputation for fostering innovative start-ups and ensure firms can access the talent, finance and support they need to scale up here in the UK.

‘This review will make an important contribution to our plan to retain the UK’s fintech crown, create more skilled jobs, and deliver better financial services for people and businesses.’

Ron Kalifa OBE said: ‘Fintech has the power to change lives, both in terms of job creation and better wages that are so essential to our recovery; and making financial services more accessible and relevant to people’s lives.

‘We must continue to nurture our start-up culture, but crucially we must also give our high growth firms the support to become global giants.

‘With the right reforms that encourage entrepreneurialism, investment and make it easy to attract and invest in talent, Britain can usher in a period of dominance that can help us build back better from Covid-19.’

Ashok Vaswani, CEO, consumer banking & payments at Barclays, said: ‘We warmly welcome the Kalifa Review. As the UK looks to forge its own path in the world, it is absolutely right that the government explores how it can ensure the ongoing success of the UK fintech sector. We hope this Review will help create the right conditions for UK fintechs to grow and succeed and look forward to working with the government and the fintech ecosystem to ensure the UK retains its position as a global centre for fintech and innovation.’

The independent Khalifa Review of UK Fintech report is available here.

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