Labour pledges to ’embrace’ fintech in bid to deliver £330bn boost
Rachel Reeves’ Treasury has pledged to “embrace” the fintech sector today after a trade body said the industry could bolster the government’s coffers to the tune of £330bn over the next five years.
In a policy plan for the sector, sent to Reeves and shared exclusively with City A.M., fintech body Innovate Finance said fintech firms could deliver £328bn in tax revenues to the Treasury by 2029 if ministers were able to unlock a wave of institutional investment and streamline data policy.
“Fintech is one of the most obvious drivers for growth in the UK,” Janine Hirt, Innovate Finance boss, told City PM
“We would love to see an early commitment from government to supporting the growth of the fintech sector by introducing smart data legislation in the king’s speech, reviewing the proposed implementation of the new mandatory reimbursement scheme for authorised push payments, committing to delivery of the Mansion House Pensions Compact to increase access to growth capital, and focusing regulators on innovation and growth,” she added.
The so-called ‘Fintech Plan for Government’ maps out a route for the UK to “maintain [its] lead in fintech”, as international competitors muscle in and look to pull start-ups away to international markets, Innovate Finance said.
While investment into UK fintech rocketed in the decade to 2022, funding has since slowed as rising interest rates have cut off the flow of cheap cash and hammered venture capital investors.
Funding for UK fintech firms slumped 37 per cent in the first six months of the year after an already quiet 2023, though the UK remains only second behind the US and dwarfs European countries in terms of capital invested.
Tech industry figures have been calling on the pension industry to throw their weight behind the start-ups in line with mega-funds in the US and Canada. While ten of the UK’s biggest pension firms last year committed to pumping five per cent of their assets into start-ups by 2030, in the so-called Mansion House Compact, some in the City have been critical of the pace of movement on the plans.
City PM revealed yesterday that signatories of the Mansion House Compact are set to meet this Thursday to discuss progress on the plans and draw up a to-do list for Rachel Reeves.
Reeves has rolled out a number of measures designed to ease the flow of cash from private investors into the UK since Labour came to power last week.
The government is working up specific plans on how to unlock the growth of the sector, though no announcements is expected to be made imminently, City A.M. understands.
“We want to embrace FinTech as the future of financial services – driving innovation, boosting investment and harnessing its potential to support financial inclusion and the wider economy,” a Treasury spokesperson told City PM
In the plan shared with Reeves, Innovate Finance said fintech would “help deliver government goals” and add £328bn to the Treasury’s coffers via tax revenues through the growth of the sector.
Central to the body’s plans is a call for ministers to embrace so-called smart data, a form of “data portability” that allows companies to more easily transfer information. Then-Chancellor Jeremy Hunt said last Autumn he wanted to “kickstart a smart data big bang” by overhauling data rules.
Innovate Finance has also called for the government to reverse a planned shake-up of fraud rules that will force payment companies to reimburse victims of the fraud up to a limit of £450,000. The plans, drawn up by the Payments Systems Regulator, have been roundly slammed by companies who have warned it could cripple the payments system and put smaller firms out of business.